Gold Squeezed by Conflict and Interest Rates!
Gold prices hovered around US$4,100 per troy ounce on Wednesday (July 8th) after previously falling more than 1%. Pressure arose after the United States military launched new airstrikes against Iran, following a series of attacks on ships passing through the Strait of Hormuz.
This latest escalation has renewed market concerns about Middle East stability. The US attacks risk disrupting the interim peace deal between Washington and Tehran, which had previously eased market concerns about global energy supplies.
Oil prices also rose following the escalating tensions. Rising energy prices have rekindled inflation concerns, as higher oil costs can put downward pressure on goods and transportation costs. If inflation rises again, the Federal Reserve could maintain its tighter stance or open up the possibility of an interest rate hike.
This puts pressure on gold. While gold is typically sought after when geopolitical risk increases, the prospect of high interest rates actually weighs on it. Gold does not provide a yield, so when the prospect of an interest rate hike increases, investors tend to look to interest-bearing assets such as government bonds.
In addition to the military strikes, the United States also revoked the permit that previously allowed Iran to sell crude oil on the global market. This move could increase the risk of supply disruptions, especially if Gulf vessels and producers become increasingly reluctant to use the Strait of Hormuz as a shipping route for energy.
Looking ahead, market focus remains on the minutes of the Federal Reserve's June meeting. Investors are eager to see whether the Fed remains hawkish or becomes more cautious following weak US employment data. For gold, the US$4,100 area is a key level. If it holds, the opportunity for a rebound remains open, but if it breaks, selling pressure could resume. (asd)*
Source: Newsmaker.id
