Gold traded below two-week highs on Thursday as an escalating Middle East conflict drove oil prices higher, while traders shifted focus to next week's Federal Reserve meeting for clues on the timing of potential interest rate hikes.
FUNDAMENTALS
Spot gold was little changed at $4,133.39 per ounce as of 0115 GMT, having climbed to $4,165.87 in the last session, its highest since July 7. U.S. gold futures for August delivery fell 0.4% to $4,136.8.
Oil prices rose more than 1.5% to their highest in more than six weeks, with the United States launching a new round of strikes on Iran and Yemen's Houthis targeting oil tankers in the Red Sea. [O/R]
The dollar largely stabilised on Thursday as renewed U.S.-Iran tensions underpinned demand for the safe-haven currency, while the yen languished near a 40-year low. [USD/]
Interest rate sensitive two-year U.S. Treasury yields climbed to a 17-month high as rising oil prices stoked concerns that renewed energy disruptions could reignite inflation and increase the odds of Fed interest rate hikes. [US/]
The Fed meets next week, when the central bank is widely expected to keep interest rates unchanged, although futures markets are broadly positioned for at least one rate hike by year end.
High interest rates tend to diminish the appeal of the non-yielding bullion.
The European Central Bank is all but certain to keep interest rates unchanged on Thursday but will hold the door wide open to another rate hike in September.
NOVAGOLD Resources said on Wednesday it would acquire the shares it does not already own in Donlin Gold from Paulson Advisors in an all-stock deal that would create a gold producer worth $4.2 billion.
Spot silver was up 0.1% at $59.78 per ounce, platinum inched 0.1% higher to $1,646.57 and palladium gained 0.4% to $1,296.50.
DATA/EVENTS (GMT)
0645 France Business Climate Mfg, Overall Jul
1000 UK CBI Business Optimism Q3
1215 EU ECB Financing Rate Jul
1215 EU ECB Deposit Rate Jul
1230 US Initial Jobless Clm 18 Jul, w/e
1400 EU Consumer Confid. Flash Jul
