Iran Conflict Puts Pressure on Oil Prices, Weighs on Gold Bulls

The US inflation rate cooled slightly in July, which may complicate the Federal Reserve's decision on interest rates. The annualized US consumer price index eased to 3.4% from 3.5% in June, matching projections. This development has investors pricing in a roughly 56% chance of keeping rates steady in September and 44% anticipating a quarter-point rate hike.

Higher energy prices could encourage the Federal Reserve to keep rates elevated for longer, increasing the opportunity cost of holding non-yielding bullion like gold. The conflict between the US and Iran has reached its 166th day, with a top adviser to the commander of Iran's Islamic Revolutionary Guard Corps saying that Iran could 'prolong' the war until President Donald Trump is out of office.

Iran's hardening stance over control of the Strait of Hormuz and other demands to end the war has dashed hopes for a quick deal. Oil prices are ticking up, with Brent rising around 1% before paring gains to trade 0.2% higher at $89.12 a barrel.

Investors are pricing in a more protracted disruption, with longer-dated gold moving higher. Technical levels show that despite testing the day's high and low, gold futures are facing significant selling pressure above a key resistance level of $4,494.66.