Gold prices pulled back from a two-week peak on Thursday, reversing gains made the previous day as market dynamics shifted ahead of a pivotal week for monetary policy.
The precious metal faced headwinds from a strengthening U.S. dollar, which eroded the appeal of the non-yielding asset, while escalating conflict in the Middle East drove oil prices higher, creating a complex risk environment for traders.
The retreat marks a continuation of the downward trajectory seen earlier in the week, as investors weighed the immediate impact of geopolitical instability against broader macroeconomic signals.
While the Middle East conflict typically supports safe-haven flows into gold, the concurrent rise in energy costs and currency strength has limited the metal's upside potential.
Traders are now focused on the Federal Reserve's policy meeting next week, seeking clarity on the timing of future rate adjustments.
The interplay between oil and gold remains a key theme, with higher energy prices potentially fueling inflationary pressures that could complicate the Fed's path.