Gold holds losses as bond sell-off, Hormuz limbo weigh on outlook

[SINGPAORE] Gold steadied on Wednesday (Aug 19) after a bond rout and deadlock in the Strait of Hormuz snapped a nascent uptrend. 

Bullion was trading around US$4,330 an ounce, after shedding almost 2 per cent during the previous session.

This snapped a two-day rise as a sell-off in bonds sent yields higher and buoyed the US dollar, creating twin headwinds for the precious metal.

Oil rose, as the US and Iran remained in a stalemate over control of Hormuz. 

The yield on 30-year US Treasuries hit the highest in almost two decades on Tuesday. Higher yields are typically negative for gold, which does not pay interest. 

Prospects appear dim for a swift reopening of Hormuz, through which a fifth of the world’s oil and liquefied natural gas transited before the war.

US President Donald Trump insisted on Tuesday that there were no talks ongoing with Iran, leaving control of the strait in limbo.

The memorandum of understanding the two countries signed in June has expired with no plan to extend it.

Adding to the impasse, the United Arab Emirates on Tuesday cut off trade with Iran after the Islamic Republic fired two ballistic missiles missiles into its territory, the first confirmed attack on the Gulf nation since May. 

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The next clues on the US Federal Reserve’s rate path will come later on Wednesday with the release of the minutes from its July policy meeting, followed by chairman Kevin Warsh’s speech to the Fed’s annual Jackson Hole symposium next week.

The fresh headwinds for gold came after its recovery above the US$4,000 threshold was supported by renewed investor demand and central bank buying, notably from China.

A fund manager survey by Bank of America on Tuesday showed the share of fund managers who said gold was undervalued hit the highest level since March 2023. 

Spot gold was 0.1 per cent lower at US$4,328.71 an ounce at 7.40 am in Singapore.

Silver fell 0.9 per cent to US$62.77 an ounce. Platinum and palladium also edged lower. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed after rising 0.1 per cent the previous session. BLOOMBERG