Fed Holds Rates Steady Amid Rising Middle East Tensions

The Federal Reserve kept interest rates unchanged at its July policy meeting, leaving the target range between 3.50% and 3.75%. However, three committee members voted for a 25-basis-point rate hike. Fed Chairman Kevin Warsh said that tightening in the market has done quite a bit of work for policymakers.

Warsh also mentioned that the committee will be quick to act if inflation pressures accelerate. The announcement came as US President Donald Trump threatened to strike back at Iran after a recent attack on a military base in Jordan, saying 'We'll be hitting them hard.'

Ongoing tensions in the Middle East may push crude oil prices up and prompt central banks to hold rates at elevated levels for longer, weighing on gold's appeal as a non-yielding asset. Analysts at Commerzbank argue that while gold has been weak recently, its downside may be overdone, seeing scope for prices to rebound from current levels.

Commerzbank anticipates that Fed interest rates will remain unchanged until the end of the year, which they believe would provide a more supportive backdrop for gold in the coming quarters. Gold is widely seen as a safe-haven asset and a hedge against inflation and depreciating currencies.