Gold prices held firm at around $4,018.90 per ounce, with US gold futures for August delivery slightly up by 0.1% at $4,023.10. This stability comes as markets assess the ongoing Middle East conflict, which has caused oil prices to jump over 3% after US forces struck Iran for the ninth consecutive day. Higher oil prices are stoking inflation fears, leading to expectations that interest rates will remain elevated.
The ongoing geopolitical tensions are a key driver for gold, traditionally seen as a safe-haven asset. However, the anticipated interest rate hikes by the US Federal Reserve are tempering this upward pressure. Cleveland Fed President Beth Hammack and other policymakers have indicated the potential need for further rate increases to curb persistent inflation. Traders are now pricing in an 82% chance of a December interest rate hike, up from 73% last week, according to the CME FedWatch tool.
Analysts like Kelvin Wong of OANDA express caution on gold's long-term outlook, noting that a break below the key $3,886 level could lead to further weakness towards $3,500. Brian Lan, Managing Director of GoldSilver Central, highlighted that the war and rising oil prices are keeping gold pressured. While gold typically acts as an inflation hedge, high interest rates increase the opportunity cost of holding the non-yielding asset, thus limiting its appeal.
Despite the pressures, the $4,000 mark has demonstrated significant support for gold, indicating a floor for the metal when it dips below this level. In other precious metals, spot silver saw a 1.7% gain to $56.87 per ounce, platinum remained steady at $1,592.34, and palladium inched up 0.1% to $1,249.25.
