Gold prices fall in Dubai amid Strait of Hormuz standoff and Fed rate hike expectations

Dubai: The yellow metal has seen a sharp drop in prices over the weekend as the standoff over the Strait of Hormuz kept energy prices high and added to pressure on the Federal Reserve to lift interest rates again in its fight against stubborn inflation.

In the UAE, gold prices opened this Monday morning on a low. 24-karat gold is trading at Dh505.50 compared to its previous close of Dh516.50, a drop of Dh11 overnight. 22-karat is trading at Dh468, whereas 14-karat gold has dropped to just Dh300 per gram.

If you look at bullion trade, that has seen a sharp decline of 1.8 percent falling below the $4200 levels. This is an extension of its prior slide where it lost more than 2% last week. Crude rose after Tehran said it would not back down from its conditions for reopening the strait, a day after Trump turned down its seven-day offer. Trump told Axios he anticipates negotiations will resume this week. With the US-Iran conflict heading into its eighth month, Brent is up more than 70% in 2026.

Fed officials unanimously backed a quarter-point increase in the benchmark rate earlier this month, and several have since signalled that further hikes could be needed. Markets are pricing in roughly a 65% chance of another increase in October.

Justin Lin, an analyst at Global X ETFs, told Bloomberg that gold remains closely tied to oil prices and the shifting hopes for a resolution in the Middle East. “Much of the natural buyer base is likely to remain on the sidelines until there is greater clarity around how the Iran war ends. At the same time, sellers are largely taking their cues from real yields, which have continued to move higher,” he added.

Gold has stayed in a relatively narrow $4,230 to $4,510 range in September as traders repeatedly reassess where Fed policy is headed, keeping it far below January's all-time high of nearly $5,600. Even so, dealmaking hasn't slowed. Gold Fields Ltd. of South Africa made an approach for Northern Star Resources Ltd., Australia's biggest gold producer, only to be rebuffed on Monday.

At 08:30 a.m. in Dubai spot gold was down 1.88 per cent at $4,197.54 an ounce. Silver shed 3.41 per cent to $61.98, adding to last week's 3% drop, while platinum and palladium both fell by more than 2%. The Bloomberg Dollar Spot Index, a measure of the US dollar, rose 0.1% after climbing 2% so far this mont