Gold Steady, War Risk Looms
Gold prices held steady at around US$4,060 per troy ounce in early trading on Thursday (July 16th), after closing slightly higher by 0.2%. The market is still weighing two major sentiments: more benign US inflation data and the resurgent risk of war in the Middle East.
The US dollar and Treasury yields weakened briefly after US producer inflation data showed price pressures were easing. This data signaled that the Fed may have more room to delay interest rate hikes in the near future.
However, the positive sentiment from lower inflation was not enough to push gold higher. This is because the June data does not include the latest impact of the escalating US-Iran conflict, particularly after Washington launched airstrikes for the fifth consecutive day.
The conflict has become a growing concern after the interim US-Iran peace deal nearly collapsed. President Donald Trump also vowed to escalate attacks until Iran stops attacking ships and reopens the Strait of Hormuz, one of the world's most vital energy routes.
For gold, this situation makes price direction sensitive. On the one hand, lower inflation dampens expectations of interest rate hikes and supports gold. However, on the other hand, the war that drives up oil prices could trigger inflation again, thus allowing the Fed to maintain its tight policy stance.
As a result, gold still has the potential to remain in a high range as long as geopolitical uncertainty persists. However, its gains could be restrained if oil prices continue to rise, the dollar strengthens again, and Fed officials remain open to the possibility of an interest rate hike. The US$4,000 area remains a key level to maintain, while further strengthening requires fresh impetus from a weakening dollar and yields. (asd)*
Source: Newsmaker.id
