TLDR
- Gold fell nearly 1% to around $4,529 after the United States carried out new military strikes on Iran
- Dollar and oil prices rebounded after news of the strikes, putting pressure on gold
- Silver and platinum also declined, with silver falling more than 2%.
- Markets now place a 40% probability that the Fed will raise interest rates by 25 basis points by the end of the year.
- US Secretary of State Marco Rubio said the US-Iran agreement “will take a few days,” casting doubt on the peace deal.
New US military strikes on Iran sent gold prices lower on Tuesday, halting a recent rally in bullion as the dollar stabilized and oil returned to the rise.
The spot price of gold fell 0.9 percent to $4,529.07 per ounce in Asian trading. Gold futures were relatively stable at $4,560.92. Earlier in the day, New York gold futures briefly rose 0.2% to $4,532.30 before retreating.
Other precious metals fell in line with gold. Silver in spot transactions fell 2.1 percent to $76.43 per ounce. Platinum in spot transactions fell 0.7 percent to $1,951.33.
The sales came after US military forces struck missile launch sites and mine-laying boats in southern Iran late Monday. US Central Command described the attacks as “self-defense.”
gold Other metals achieved gains in recent sessions. Reports had indicated that the United States and Iran were close to reaching a framework agreement to reopen the Strait of Hormuz. Monday’s strikes ended that optimism.
Growing doubts about the peace agreement
Iranian officials warned that any new attacks on the country’s army would be met with retaliation. This led to an increase in tension between the two sides after cautious diplomatic progress.
US Secretary of State Marco Rubio added to the uncertainty. He said the agreement “will take a few days” and warned against reopening the Strait of Hormuz “one way or another.” Central Command also said that the current ceasefire was still technically in effect.
These conflicting signals left traders unsure how to read the situation. Prospects for a near-term peace agreement faded quickly.
The dollar stabilized after its decline in recent sessions. Stronger dollar This usually affects gold, which is priced in US currency.
Oil prices rebounded after a week of declines following news of the strikes. High oil prices raise concerns about inflation, and fears of inflation tend to push central banks toward tightening monetary policy.
Fears of rising interest rates are weighing on gold
This dynamic is bad news for gold. While gold has traditionally been seen as a hedge against inflation, rising interest rates increase the opportunity cost of holding gold, because the metal pays no return.
Markets now expect a 40% chance that the Fed will raise interest rates by 25 basis points before the end of the year. This is a noticeable shift. At one point, markets had priced in a quarter-point rate hike by the Fed by December.
Other major central banks have also signaled the possibility of raising interest rates to combat energy-driven inflation linked to the Iranian conflict.
Gold has faced pressure throughout this year due to fears that the Iran war will keep energy prices high and push central banks into a more aggressive stance on interest rates.
The latest round of strikes did not resolve these concerns. With the timeline for a peace agreement now unclear, inflationary pressure from oil remains a live concern for gold investors.
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