Fed Hike Risk vs. Geopolitical Tensions: Gold Futures in a Tight Spot
Gold futures have been fluctuating between two opposing forces: the potential for a rate hike by the Federal Reserve and the ongoing tensions in the Middle East. Despite the recent inflation data showing headline inflation cooling to 3.4% year-over-year, the odds of a 25 basis point September rate hike still stand at around 40%. This has kept the rally in gold capped, but not eliminated entirely.
The Iran war, which began on February 28, has effectively closed the Strait of Hormuz to commercial shipping, carrying about one-fifth of global daily oil production. While this keeps energy-driven inflation a risk, it also contributes to a geopolitical safe-haven bid for gold.
China's central bank has been buying gold consistently, adding roughly 20 tonnes in July and contributing to the metal's ability to absorb supply during pullbacks.