Gold edged lower on Friday, and was headed for a weekly loss, as fading hopes of a swift resolution to the Middle East conflict fuelled fears of higher inflation and interest rates, reports Reuters.
Spot gold was down 0.1 per cent at $4,469.59 per ounce at 1159 GMT, having fallen about 1.5 per cent this week. US gold futures for August delivery fell 0.3 per cent to $4,491.80.
The Iran-backed Hezbollah militia rejected a new ceasefire in Lebanon and Israel said it would not withdraw its troops, undermining US President Donald Trump's efforts to halt fighting there to forge peace with Iran.
"When the Iran-US negotiations don't seem to be going in the right direction, it tends to drive up oil prices. That triggers inflation fears and increases the likelihood that interest rates will remain relatively high, pressuring gold," said Nitesh Shah, commodity strategist at WisdomTree.
Brent crude oil prices have risen 2.8 per cent so far this week as the key Strait of Hormuz remains largely shut.
Bullion has fallen about 16 per cent since the Iran conflict began in late February as oil prices rose, stoking fears of inflation and higher interest rates. While gold is seen as a hedge against inflation, higher rates tend to weigh on the non-yielding metal.
Markets are currently pricing in a Federal Reserve rate hike before year-end, with a 37 per cent chance of a 25-basis-point hike in December, according to CME Group's FedWatch tool.
Investors now await May US nonfarm payrolls data, due later in the day, to gauge the Fed's monetary policy path.
"The main driver of the weaker gold price is lacklustre investment demand - and that is influenced by the US economy still expanding at a solid pace, while inflation is trending higher. The payroll data will be an important input factor for the Fed," said UBS analyst Giovanni Staunovo.
Meanwhile, gold demand was subdued in India this week as buyers stayed on the sidelines due to volatile overseas prices, while premiums in China eased.
Spot silver fell 1.5 per cent to $72.73 per ounce, platinum dropped 0.5 per cent to $1,890.60, and palladium slid 0.3 per cent to $1,316.62. All were headed for a weekly loss.
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