Oil Price Surge Reignites Inflation Fears as Gold Prices Steady
Gold prices settled steady on Thursday after earlier gains, as oil prices rose following reports of Iran reviewing restrictions on 'hostile' vessels in the Strait of Hormuz. This move reignited inflation fears and rate hike expectations.
The Iranian parliamentary committee is reviewing a preliminary bill that would bar U.S., Israeli, and other 'hostile' vessels from transiting the Strait of Hormuz. Oil prices rose by more than $3 a barrel on this news, which feeds into inflation as manufacturers pass costs to consumers.
Jim Wyckoff, a market analyst at American Gold Exchange, said Iran's draft bill is having an impact because of heightened inflation if crude oil prices are going to rally again. Higher energy prices encourage central banks to adopt a higher-for-longer policy stance to combat price pressures.
The Federal Reserve outlook remains the main driver for gold, and Friday's U.S. jobs data will influence what the central bank says on interest rates. Traders are currently pricing in about a 57% chance of a rate hike at the September meeting and an 84% chance of a hike in December.
Bullion was still down around 24% from its record high of $5,594.82/oz hit in late January.