Fed Minutes and Iran Pressure Gold
Gold prices weakened sharply on Wednesday (July 8th) after US President Donald Trump said the ceasefire with Iran was "over." This statement renewed market concerns that a renewed conflict could push up energy prices and trigger inflationary pressures.
Gold briefly fell as much as 2.1% to below US$4,021 per troy ounce before paring some of its losses. This movement sent gold heading for its third consecutive daily decline. At 4:00 p.m. New York time, spot gold fell 0.7% to US$4,076.48 per troy ounce.
Pressure on gold arose after the US launched new attacks on Iran and revoked permits that previously allowed Iranian oil sales. This move came after Iran was accused of attacking merchant ships around the Strait of Hormuz. As a result, oil prices surged and rekindled concerns about energy inflation.
Rising oil prices could make it more difficult for the Federal Reserve to ease monetary policy. If inflation rises again, the Fed could potentially keep interest rates high for longer or even open the door to a rate hike. This situation puts a burden on gold because the precious metal offers no yield.
The minutes of the FOMC meeting on June 16-17 also showed that some Fed officials saw reason to raise interest rates, although they ultimately supported the decision to hold rates. Overall, the minutes showed that inflation concerns remained elevated, while concerns about the labor market eased somewhat.
Technically, the US$4,000 area is a key level being monitored by the market again. If selling pressure persists, gold risks retesting that level. However, to break through and sustain below US$4,000, the market will likely need additional impetus such as rising real yields, strengthening expectations of high interest rates, and greater position liquidation. (arl)
Source: Newsmaker.id
