Gold Falls, Iran and the Fed Under Major Pressure
Gold prices weakened again at the start of Asian trading on Thursday (July 9), with XAU/USD hovering around US$4,075 per troy ounce. This pressure kept gold below the US$4,100 level, as market vigilance was renewed by escalating tensions between the United States and Iran.
Gold's decline occurred after US President Donald Trump declared that the ceasefire with Iran was "over." This statement sparked concerns that the conflict between the two countries could escalate and disrupt stability in the Middle East, particularly the crucial energy trade route in the Strait of Hormuz.
Trump also threatened to bomb Iran again for a second day and opened the possibility of reimposing a US naval blockade. This threat came after attacks on tankers passing through the Strait of Hormuz. This situation has raised concerns among market participants about the potential disruption to global oil supplies.
Rising geopolitical risks typically support gold as a safe-haven asset. However, this time, gold is under pressure as the market focuses more on the impact of surging energy prices on inflation. If oil prices continue to rise, inflationary pressures could potentially increase again, making it difficult for the Federal Reserve to lower interest rates.
High interest rate expectations are a significant burden on gold. The precious metal offers no yield, making it less attractive when the market expects interest rates and bond yields to remain high for longer. Swap traders are now pricing in a more than 30% chance of a Fed rate hike at its next meeting, up from less than 20% last week.
On the monetary policy front, the minutes of the Fed's June 16-17 meeting showed that several officials saw reason to raise interest rates, although they ultimately supported the decision to hold rates. The minutes also reflected the Fed's concerns about persistently high inflation, while concerns about the labor market have eased somewhat. Given these conditions, gold remains at risk of pressure as long as the US-Iran conflict and high interest rate expectations continue to loom over the market. (asd)
Source: Newsmaker.id
