Gold slips for second day as Hormuz tensions fan inflation fears

[SINGAPORE] Gold fell for a second day after renewed attacks on shipping in the Strait of Hormuz, a reminder of the risks faced by vessels carrying oil and natural gas via the waterway.

Bullion dropped as much as 0.9 per cent to near US$4,125 an ounce, having given up 0.3 per cent on Monday (Jul 6).

A tanker reported being hit east of Oman, while Axios said that Iran fired at least two missiles at commercial ships transiting the strait.

Oil advanced, rekindling concerns around inflation that have raised the likelihood of interest-rate hikes – a negative for gold, which does not pay interest.

The metal is trading in a relatively narrow range, however, with investors awaiting fresh insights on the Federal Reserve’s rate outlook when the US central bank releases the minutes of its June meeting later this week. After spiking on the hawkish stance adopted by new Fed chair Kevin Warsh, bets on a hike eased following weaker-than-expected jobs data last week.

“On balance, the market is taking a slightly more cautious view about the prospect for US rate hikes,” said Rhona O’Connell, head of market analysis for EMEA and Asia at StoneX Group. “This has helped give hard assets some support.”

Bullion is more than a fifth below where it traded immediately prior to the war in the Middle East, although it’s fresh from its first weekly gain since May and bounced back above US$4,000 an ounce after dropping below the psychological threshold, as well as several key moving averages.

Light bargain-hunting has lifted gold back above the 10-day moving average, with technical indicators “suggesting some upside scope”, O’Connell said. “It has found some resistance at US$4,180 and is resting on technical support above US$4,130,” she added.

Spot gold fell 0.6 per cent to US$4,138.55 an ounce at 10.34 am in Singapore. Silver slid 0.9 per cent to US$61.51 an ounce. Platinum was little changed, while palladium edged higher.

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The Bloomberg Dollar Spot Index, a gauge of the US currency, was flat. BLOOMBERG