As oil prices increased due to an intensifying Middle East conflict, gold fell below two-week highs on Thursday. Meanwhile, traders turned their attention to the Federal Reserve meeting next week in search of hints regarding the timing of possible interest rate hikes. Spot gold was little changed at $4,133.39 per ounce as of 0115, having climbed to $4,165.87 in the last session, its highest since July 7. U.S. gold futures for August delivery experienced a decline of 0.4%, settling at $4,136.8.

Oil prices increased by over 1.5%, reaching their highest level in more than six weeks, following the United States’ initiation of a new series of strikes on Iran and the targeting of oil tankers in the Red Sea by Yemen’s Houthis. 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. Interest rate sensitive two-year U.S. Treasury yields reached a 17-month high as escalating oil prices heightened worries that renewed energy disruptions could rekindle inflationary pressures and elevate the likelihood of Federal Reserve interest rate increases.

The Fed meets next week, when the central bank is widely expected to maintain interest rates at their current levels, although futures markets are broadly positioned for at least one rate hike by the end of the year. Elevated interest rates generally reduce the attractiveness of the non-yielding bullion. The European Central Bank is highly likely to maintain interest rates at their current levels on Thursday, while simultaneously leaving the possibility of an additional rate increase in September very much on the table.

NOVAGOLD Resources announced on Wednesday its intention to acquire the remaining shares of Donlin Gold from Paulson Advisors in an all-stock transaction, resulting in the formation of a gold producer valued at $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.