Gold prices edged lower during Thursday's Asian session as rising oil prices and renewed inflation concerns boosted expectations that the United States Federal Reserve could keep interest rates higher for longer, reducing demand for the non-yielding precious metal.
By 4:40 pm AEST (6:40 am GMT), spot gold was down 0.3% at US$4,118.01 an ounce, although prices remained above the key US$4,100 level.
The decline came as escalating tensions in the Middle East drove oil prices to six-week highs, reinforcing concerns that higher energy costs could add to inflationary pressures and strengthen the case for further monetary tightening by the Federal Reserve.
The United States launched another round of strikes against Iranian targets overnight, while Yemen's Iran-backed Houthi movement targeted oil tankers in the Red Sea, heightening concerns over global energy supplies and geopolitical risks.
At the same time, concerns over potential Japanese currency intervention kept traders cautious on the U.S. dollar, limiting broader gains in the greenback as markets monitored the USD/JPY exchange rate.
Investor sentiment was also supported by corporate earnings, with Alphabet and Tesla reaffirming significant spending plans on artificial intelligence infrastructure.
The announcements helped lift semiconductor shares and supported broader gains across Asian equity markets, reducing demand for traditional safe-haven assets.
Looking ahead, investors will closely watch the European Central Bank's policy decision later on Thursday.
While the ECB is widely expected to leave interest rates unchanged, any indication that policymakers remain open to a rate increase in September could reinforce hawkish expectations and place additional pressure on gold prices.
