FX.co ★ Gold Retreats as Rising Oil Prices Boost Fed Rate Hike Expectations

Gold prices slipped below $4,100 per ounce on Thursday, retreating from two-week highs as escalating tensions in the Middle East pushed oil prices higher and strengthened expectations that the US Federal Reserve could raise interest rates later this year. The Iran-backed Houthi movement said it had targeted two Saudi oil tankers as part of a naval blockade, stoking concerns over a potential new chokepoint for global oil supplies. At the same time, the US carried out a 12th consecutive night of strikes on Iran, provoking further retaliation and heightening fears of prolonged disruptions to energy exports from the Gulf.

Rising oil prices have reinforced inflation worries, prompting investors to anticipate that the Fed will keep monetary policy tighter for longer—a backdrop that typically pressures non-yielding assets such as gold. Money markets are now pricing in roughly a 78% probability of a Fed rate hike in September.