Gold prices eased to around $4,100 an ounce, extending a pullback from a two-week high, as renewed tensions between the US and Iran, particularly fresh US airstrikes following attacks on ships in the Strait of Hormuz, fueled inflation fears and raised expectations for interest rate hikes. This comes after the US revoked a waiver allowing Iran to sell crude on global markets, further contributing to concerns about global energy supplies, with oil prices rising in response.
Investors are closely watching the Federal Reserve's June meeting minutes, due later today, for further clues on the policy outlook. Gold had seen some recovery last week after weaker-than-expected US jobs data, which showed only 57,000 jobs added in June (compared to expectations of 110,000), prompted markets to scale back near-term Fed rate hike expectations. However, the renewed geopolitical instability has shifted sentiment, with markets now betting on a September Fed rate hike at over 67%, up from about 57% just the previous day.
StoneX Group's Head of Market Analysis for EMEA and Asia, Rhona O’Connell, noted that while the market is taking a slightly more cautious view on US rate hikes, which generally supports hard assets, the hawkish stance of new Fed Chair Kevin Warsh has kept rate hike prospects elevated. Higher interest rates are typically negative for gold, as it is a non-yielding asset. Spot gold fell 0.7% to $4,135.13 an ounce in London, while silver slid 2% to $60.80 an ounce.
