Gold prices fell below $4,300 per ounce on Wednesday, reaching their lowest level in more than three weeks.
The decline came as rising tensions in the Middle East pushed oil prices higher. Higher oil prices have also increased concerns about inflation and possible US interest-rate increases.
After Asian markets opened, spot gold fell 0.6% to around $4,290 per ounce. This marked its lowest level since August 7. Gold has now declined for four consecutive trading sessions.
Meanwhile, gold futures for December delivery dropped 1% to $4,350 per ounce.
The stronger US dollar also pressured gold prices. A stronger dollar makes precious metals more expensive for investors who use other currencies.
Tensions between the United States and Iran have added further uncertainty to global markets. The US carried out several airstrikes against Iran on Tuesday, while Tehran responded with its own attacks.
The latest escalation represents one of the most serious developments in the tensions between Washington and Tehran in recent weeks. The conflict pushed oil prices higher for a third consecutive day.
It also increased yields on US Treasury securities, adding further pressure on gold.
Bas Kooiman, chief executive of DHF Capital, said rising oil prices have increased fears of higher inflation. He explained that expensive crude oil could encourage tighter monetary policy and higher interest rates.
Higher interest rates generally reduce demand for gold because the precious metal does not generate interest income.
According to the CME FedWatch tool, traders now see a 67% probability that the US Federal Reserve will raise interest rates at its meeting this month.
Federal Reserve Governor Michael Barr said the central bank could raise rates if inflation does not decline quickly. Last week, Fed Chair Kevin Warsh also pointed to the possibility of higher rates.
Investors are now watching US employment data closely. The ADP private-sector employment report is due Wednesday, while the government’s nonfarm payrolls report will follow on Friday.
Kooiman said weak employment data could ease pressure on gold. However, strong labor figures or hawkish comments from Federal Reserve officials could extend gold’s decline.
Markets will therefore focus on both employment data and central-bank signals for clues about gold’s next direction.
