Gold holds losses on signs that US-Iran ceasefire is fraying

[SINGAPORE] Gold held a loss as the US and Iran traded fire in the Persian Gulf on Monday (May 4), jeopardising a four-week-old ceasefire and fuelling inflation risks.

Bullion traded near US$4,516, after falling 2 per cent on Monday. The US military said that it fought off attacks from Iran as it facilitated the passage of two US-flagged vessels through the Strait of Hormuz. Adding to the tension, the UAE said that it intercepted cruise missiles fired by the Islamic Republic and blamed an Iranian drone strike for a large fire at its Fujairah port.

The violence shook a ceasefire that has largely held since going into effect on Apr 8. Oil prices surged on the reports, while 30-year Treasury yields rose to the highest since July, as traders boosted wagers that the US Federal Reserve will have to raise interest rates to curb inflation. That’s negative for non-yielding bullion.

Traders are looking to this week’s announcement of the US Treasury Department’s borrowing plans for the next three months and a loaded calendar of economic releases for further cues on the trajectory of rates.

Spot gold was little changed at US$4,516.81 an ounce at 6.56 am in Singapore. Silver shed 0.2 per cent to US$72.59. Platinum and palladium edged lower. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.2 per cent on Monday. BLOOMBERG