Gold holds drop as US strikes in Iran cloud rate hike outlook
Bullion was near US$4,100 an ounce in early trading, after losing 1.4% in the previous session
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GOLD held a decline on Wednesday (Jul 8) as renewed US airstrikes on Iran endangered an interim deal to end the war that has stoked inflation and raised the prospects for interest rate hikes.
Bullion was near US$4,100 an ounce in early trading, after losing 1.4 per cent in the previous session.
US Central Command said it launched “powerful strikes” in retaliation for Iranian attacks on shipping in the Strait of Hormuz, just hours after Washington revoked a waiver that had allowed Teheran to sell oil globally. Crude prices advanced.
Any rebound in energy prices will reinforce expectations that the Federal Reserve may need to keep interest rates higher for longer to combat stubborn inflation.
Elevated borrowing costs are typically a headwind for gold, which does not pay interest. A stronger US dollar has also made bullion that has priced in the US currency more expensive.
Traders will be watching for clues to the interest rate outlook when the much-anticipated minutes of the Fed’s June meeting are released later on Wednesday.
Bullion slumped after that meeting, as new Fed chair Kevin Warsh leaned more hawkish than markets had expected. Gold is down by more than a fifth since the Iran war started.
Spot gold slipped 0.2 per cent to US$4,098.04 an ounce at 6.55 am in Singapore. Silver fell 0.4 per cent to US$59.72.
Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose for a second day. BLOOMBERG
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