Gold slips as renewed Mideast tensions keep Fed hike bets alive
Debasement trade is likely to continue into September, which will support the metal
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[SINGAPORE] Gold edged down as renewed geopolitical risks stoked concerns about inflationary pressures that could make the US Federal Reserve hike interest rates, a headwind for the precious metal.
Bullion fell 0.1 per cent as escalating tensions in the Middle East sent US crude above US$85 a barrel and Treasury yields higher.
Elevated energy costs mean that the US central bank may need to raise rates to contain price pressures. Higher rates are typically negative for non-yielding gold.
The precious metal tumbled in the prior session after Fed chairman Kevin Warsh delivered a hawkish speech vowing to fight inflation, prompting traders to price in a more than 60 per cent chance of a rate hike at the central bank’s next meeting in September.
Bullion is still up around 10 per cent in August, heading for the biggest monthly gain since January, with prices surging after the US Treasury’s surprise announcement mid-month to ramp up bond buybacks.
The intervention to rein-in borrowing costs revived the so-called debasement trade, driven by concerns over rising sovereign debt and currency devaluation, a theme that helped fuel gold’s 65 per cent rally in 2025.
The dovish Treasury and hawkish Fed are in a “tug of war”, Nicky Shiels, head of research and metals strategy at MKS PAMP, said in a note.
The debasement trade is likely to continue into September as the Treasury starts bond buybacks and ahead of the Fed meeting, which will support gold, she added.
The US and Iran exchanged strikes for the first time in about a month as American forces hit an island in the Strait of Hormuz and the Islamic Republic responded by launching attacks on the United Arab Emirates and Jordan.
US President Donald Trump told Fox News on Monday (Aug 31) morning that the US would respond to Iran’s attacks on US forces, without giving details.
Spot gold was 0.1 per cent lower at US$4,449.32 an ounce at 3.54 pm in New York. Silver was up 0.2 per cent at US$66.57 an ounce. Platinum and palladium both fell.
The Bloomberg Dollar Spot Index, a gauge of the US currency, was down 0.2 per cent. BLOOMBERG
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