Gold prices today: Dubai rates dip as oil soars above $100

Dubai: Gold prices in Dubai edged lower on Friday afternoon as soaring oil prices added to inflation concerns and strengthened expectations that the US Federal Reserve could keep interest rates higher for longer.

The move was modest for shoppers, with 24K gold at Dh522 per gram, down from Dh522.50 at Thursday's close, while 22K gold slipped to Dh483.50 from Dh483.75.

The Dubai market was tracking a weaker international gold price, with gold at about $4,347.47 an ounce, down 0.42 per cent.

The precious metal is heading for its third consecutive weekly decline, despite recovering some ground on Friday. Spot gold was down nearly 2 per cent for the week, according to Reuters, as markets weighed rising energy prices, inflation risks and expectations for US interest rates.

Oil is adding a fresh complication for gold investors and UAE consumers.

Brent crude was trading close to $108 a barrel, according to Bloomberg, and was on course to finish the week above $100 for the first time since mid-May, Reuters reported.

Higher oil prices can feed into broader inflation by raising transportation, production and other costs. That can make it harder for central banks to cut rates or encourage further rate increases.

“Renewed price pressures, partly driven by elevated energy costs, reinforcing concerns that inflation could remain persistent,” said Manav Modi, commodity analyst at Motilal Oswal Financial Services, according to Bloomberg.

Gold's next major test is the latest US consumer inflation reading, due later Friday.

The US Producer Price Index rose 0.4 per cent in August, following an upwardly revised 0.1 per cent increase in July. The stronger producer-price data prompted traders to increase bets on higher US interest rates, putting pressure on gold.

“A stronger-than-expected reading would reinforce the case for several interest rate increases, potentially pushing Treasury yields and the dollar higher and placing additional pressure on gold,” said Wael Makarem, financial markets strategist lead at Exness, according to Reuters.

Gold does not pay interest, so higher bond yields can make the metal less attractive compared with interest-bearing assets.

Geopolitical tensions are providing some support for gold, even as inflation and interest-rate expectations weigh on prices.

Houthis have seized Yemen's port city of Mocha and advanced along the Red Sea coast towards strategic islands.

The wider conflict has also kept oil prices elevated, creating a difficult backdrop for markets. Higher energy costs can increase inflation expectations, potentially supporting gold as an inflation hedge, but they can simultaneously strengthen the case for higher interest rates — a negative for the metal.

“While gold is known as an inflation hedge, rising interest rates often pressure the metal, which offers no yield,” Reuters reported.

The bigger question for consumers is where gold goes next. That will depend heavily on the US inflation data, the path of Federal Reserve policy, the dollar and the trajectory of oil prices as Middle East tensions continue.

Silver was also under pressure for the week, despite rising 0.6 per cent on Friday to $63.93 an ounce. Platinum gained 1.2 per cent to $1,798.63, while palladium rose 1.4 per cent to $1,299.91. Both platinum and palladium were still heading for weekly declines.