Gold prices held steady at around $4,020 per ounce, following a nearly 2% drop in the previous session. This stability comes as traders weigh conflicting signals regarding US-Iran tensions and their potential impact on global inflation. Negotiations between Washington and Tehran are reportedly scheduled to begin in Doha on Tuesday, although Iran's foreign ministry has indicated it will send experts but ruled out direct talks. The market had previously anticipated interest rate hikes by the Federal Reserve of approximately 30 basis points by year-end, but renewed geopolitical concerns are now adding uncertainty to this outlook.
Geopolitical events, specifically Iranian attacks on cargo ships and an LNG tanker in the Strait of Hormuz, caused a rise in TTF natural gas prices and a slight increase in oil prices, fueling inflation concerns. This situation led to an initial dip in gold to $4,120 per troy ounce. However, the People's Bank of China (PBoC) has continued its gold purchasing trend for the 20th consecutive month, adding 480,000 ounces (nearly 15 tons) in June, marking its largest monthly purchase since October 2023. These strategic acquisitions, totaling 33 tons over the last three months, have provided some support to gold prices, potentially limiting further downside.
Despite the geopolitical tensions, the market's expectations for Federal Reserve rate hikes have not changed. Observers are closely watching the upcoming release of the Fed's June meeting minutes for insights into future monetary policy, especially under new Chair Kevin Warsh. Warsh has reiterated the Fed's commitment to a 2% annual inflation target. The strength of the US dollar, boosted by inflation worries stemming from potential energy supply disruptions, typically places downward pressure on precious metals. Analysts note that gold remains in a consolidation phase, and a significant shift in interest rate expectations would be necessary for a sustained upward movement in its valuation.
