Gold Falls as Rising Fed Hike Bets and US-Iran Tensions Support USD
Gold prices declined on Tuesday as market bets for a Federal Reserve rate hike in September increased, along with escalating US-Iran tensions that supported the safe-haven US Dollar.
The US Federal Reserve Chair Kevin Warsh's comments at the Jackson Hole Symposium last Friday lifted market expectations of an imminent interest rate hike, undermining gold prices. According to CME Group's FedWatch Tool, traders are now pricing in around a 65% chance that the Fed will raise borrowing costs at the upcoming policy meeting on September 15-16.
The ongoing US-Iran tensions have revived fears of persistent inflation and increased bets on a potential interest rate hike. US forces struck two rocket launchers on Iran's Larak Island, prompting an Iranian counterattack on American air bases in Jordan. This geopolitical uncertainty lends support to the safe-haven USD.
Traders are waiting for important US macro data, including the Nonfarm Payrolls (NFP) report scheduled for Friday, before making any aggressive directional bets.