Gold falls as oil rises and inflation fears persist; stocks stabilize

Gold prices fell on Wednesday, after rising more than 2% in the previous session, as higher oil prices fueled inflation concerns and increased uncertainty about the US interest rate outlook, negatively affecting the precious metal which yields no return.

Spot gold fell 0.7% to $4,025.12 per ounce. US gold futures for August delivery fell 1% to $4,030.40. Gold jumped to $4,100.49 per ounce on Tuesday, recovering from a two-week low, after data showed US consumer inflation slowed more than expected in June.

Oil prices rose on Wednesday for a third consecutive session, as US President Donald Trump reimposed a naval blockade on all Iranian ports and threatened to strike power plants and bridges next week unless Tehran resumes negotiations.

Kelvin Wong, senior market analyst at OANDA brokerage, said: "I think the market is now ignoring the CPI data, which is a lagging indicator... Trump continues to impose a blockade on ships leaving the Strait of Hormuz, which has pushed oil prices higher and pressured gold." Gold, traditionally seen as a hedge against inflation, loses its appeal in a high interest rate environment.

Senior Federal Reserve officials welcomed the lower inflation readings for June, but said they need more such readings to feel confident that price pressures are truly easing, and the US Producer Price Index, due later today, is expected to provide more information on inflation and monetary policy expectations.

Traders now see a 58% probability of a rate hike at the Fed's September meeting, down from 76% before the CPI report, and still expect an 80% chance of a rate hike in December.

In related markets, spot silver fell 0.8% to $58.18 per ounce. Platinum fell 0.2% to $1,628.06, while palladium rose 0.5% to $1,311.84.

AI boosts stocks

In stock markets, global stocks stabilized on Wednesday, supported by positive earnings from chipmaking equipment maker ASML and gains in Asian semiconductor stocks, which revived the AI sector and offset higher oil prices amid rising tensions with Iran.

The pan-European STOXX 600 index fell 0.05%, after rising the previous day on the weaker-than-expected US inflation data, which eased rate hike fears and led to a drop in the dollar and yields.