Inflation War Heats Up, Gold Under Pressure
Gold prices weakened again on Wednesday (July 15th) amid the escalating conflict between the United States and Iran, which has rekindled inflation concerns. Markets are beginning to worry that rising energy prices could force the Fed to maintain a tighter stance to keep inflation under control.
Gold briefly fell as much as 0.9% to near US$4,020 per troy ounce, after rising 1.3% on Tuesday. The previous rally was fueled by US CPI data showing consumer prices fell in June for the first time in six years.
However, the positive sentiment from the inflation data began to fade after President Donald Trump said the US would continue to attack Iran. Trump even opened the door to targeting power plants and bridges next week if Tehran did not return to the negotiating table.
Tensions escalated after Iran's Revolutionary Guard Corps declared that the Strait of Hormuz and other shipping lanes would be closed until the US stopped its attacks. This disruption to the vital Middle East energy route pushed oil and natural gas prices up for the third consecutive day.
On the monetary policy front, Fed Chairman Kevin Warsh also signaled that lower inflation data doesn't mean the mission to combat inflation is over. This statement has led the market to reconsider the possibility that the Fed could raise interest rates again if price pressures increase again.
As a result, gold remains in a sensitive position. While subdued CPI data has reduced the likelihood of a July interest rate hike to below 20%, the surge in energy prices due to the US-Iran conflict could revive inflation risks. If the dollar and yields strengthen again, gold could potentially remain under pressure, although geopolitical uncertainty continues to support it as a safe-haven asset. (arl)
Source: Newsmaker.id
