US-Iran Tensions Fuel Gold Volatility as Oil Prices Surge
US-Iran tensions have added another layer of volatility to gold prices as oil prices surge. The COMEX gold price finished around 1.50% lower at $4,408.90 an ounce, while MCX gold had edged higher last week in India.
The strong US dollar and rising US Treasury yields are also putting pressure on gold prices. Ponmudi R, CEO at Enrich Money, said that the surge in oil prices has fed into inflation expectations and pushed markets to sharply raise the odds of a US Fed rate hike at next week's meeting.
Gold still has structural demand support, however. Central banks and Asian households continued to provide underlying demand, with China's central bank adding 20 tonnes to its reserves in July. Indian gold imports nearly doubled in value to $4.16 billion in July as manufacturers and retailers replenished inventories ahead of the festive season.
The September 16 FOMC decision will be crucial for gold prices. Markets have raised the probability of a September hike to around 40%, while December hike expectations have also increased.