Hormuz Hike: Brent Crude Surge Lifts Gold's Haven Bid Ahead of Fed Decision
A recent surge in Brent crude prices to above $100 a barrel has boosted gold's haven bid ahead of the Federal Reserve's decision on interest rates. Spot gold traded near $4,403 an ounce on September 9, up 1.11%, as traders priced a 60% chance of a 25-basis-point Fed hike on September 15-16.
The US destroyed five Iranian oil tankers on September 8, prompting Iran's Revolutionary Guard to strike a US base in Jordan and raising supply risk through the Strait of Hormuz, which carries roughly one-fifth of world oil. This has led to higher energy costs, potentially lifting producer and consumer inflation, and supporting the market's current Fed hike pricing.
Lukman Otunuga, senior research analyst at FXTM, noted that a weaker dollar and technical buying are supporting gold's rebound from its 100-day moving average. However, hotter inflation would reinforce the roughly 60% probability of a Fed hike and could push Treasury yields above 4.81%, increasing pressure on gold despite the Hormuz haven bid.