Gold Prices Fall Below $4,000 as Oil Surge Fuels Inflation Fears

JAKARTA - Gold prices fell below $4,000 per ounce again on Thursday. Rising attacks in the Middle East pushed up oil prices, sparking inflation concerns, and clouding the direction of US interest rates.

Anadolu Agency quoted Friday, July 17, saying gold prices fell 1.9 percent to $3,983 per ounce by 13:10 GMT. The price was back below the psychological level of $4,000 per ounce.

Silver prices weakened further. The metal fell 3.6 percent to $55.67 an ounce.

The pressure on silver is greater because its use is quite widespread in industry. The increase in energy costs is feared to burden economic activities.

The decline in precious metals prices occurred after the United States again attacked targets in Iran on Wednesday. The ongoing hostilities have disrupted energy supplies and pushed oil prices sharply higher this week.

US President Donald Trump said Tehran signaled a willingness to return to negotiations. However, uncertainty is still high after the temporary peace deal reached last month in practice collapsed.

Gold is usually a safe-haven asset of choice when geopolitical tensions rise. However, this time's energy price hike has triggered concerns that inflation could rise again.

Higher inflation could lead the U.S. central bank, the Federal Reserve or the Fed, to keep rates high for longer or even consider further hikes.

High interest rates reduce the appeal of gold and silver because both assets do not provide returns such as interest.

Pressure on the precious metal was somewhat contained by lower-than-expected U.S. inflation data this week.

U.S. producer prices unexpectedly fell in June for the first time in nearly a year. The decline was mainly driven by lower energy costs.

The data comes after U.S. consumer inflation also came in weaker than expected. However, the spike in oil prices due to the Middle East conflict is again clouding the inflation outlook and the direction of the Fed's interest rate policy.