Gold holds decline as oil tops US$100, raising US rate-hike bets
Rising energy prices increase the possibility that the US Fed will raise interest rates
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GOLD held a retreat as the widening conflict in the Middle East pressured energy prices and increased expectations the US Federal Reserve will tighten monetary policy to contain inflation.
Bullion was trading around US$4,050 an ounce on Friday (Jul 24) after falling 2 per cent on Thursday, erasing much of the gain from the previous two sessions that was largely fuelled by dip-buying.
The war is in a new phase of escalation after the effective collapse of a truce signed in June. US President Donald Trump has threatened to step up strikes on Iran and said he hold hold the country responsible for any further attacks by Yemen-based Houthis on Red Sea ships.
Benchmark Brent crude oil rallied above US$100 a barrel for the first time since May, while two-year US Treasury yields rose for a sixth straight day on Thursday.
Adding to the uncertainty, the US announced it will collect duties of between 10% and 12.5% on imports from most major trading partners, alleging forced labour in their supply chains. It is Trump’s broadest move toward restoring his protectionist tariff regime since his earlier levies were struck down by the US Supreme Court.
Rising energy prices, alongside a seemingly resilient US labour market, increase the possibility that the US Fed will raise interest rates. Higher borrowing costs are a headwind for the non-yielding precious metal.
Swap traders currently see a 34 per cent chance that the US Fed will lift rates at its July 28-29 meeting. At least one hike is already priced in for September, and a second could come before the end of 2026.
Gold has largely hovered around US$4,000 since late June, which some traders see as a key support level. It is down by roughly a quarter since the US and Israel launched strikes on Iran in late February, helping to end a multi-year bull run that had carried the metal to a record high near US$5,600 in January.
Spot gold was little changed at US$4,049.25 an ounce as of 7.35 am in Singapore. Silver was flat at US$57.62 an ounce, after falling 3.6 per cent on Thursday. Platinum and palladium were also stable.
The Bloomberg Dollar Spot Index, a gauge of the US currency, was marginally lower after rising 0.3 per cent on Thursday. BLOOMBERG
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