Gold Price Falters Amidst US-Iran Tensions and Hawkish Fed

Gold's recent rally has been halted as it trades below $4,100 for the fourth time this week. The metal faces headwinds due to increased haven demand in the US Dollar as tensions between the US and Iran escalate.

The US Central Command said it completed its 'heavy wave of strikes' against Iran, hitting the southwestern city of Abadan and Qeshm Island. Although oil prices remain relatively unchanged by the renewed hostilities, gold buyers are trading with caution due to persisting inflation fears following a 6.50% rally in black gold yesterday.

The Federal Reserve's decision to hold interest rates at 3.5-3.75%, along with an unexpected hawkish 9-3 vote, has reinforced the idea that the Fed remains a hawkish anchor for the Dollar. This is despite Fed Chair Kevin Warsh's non-committal stance on further tightening, which raised uncertainty about whether the Fed can keep long-term inflation expectations anchored and if a rate hike remains on the table for the September meeting.

Markets are now pricing in roughly a 35% chance that the Fed will hold rates again in September, up from 24% seen a day before. The US GDP report, expected to show a 2.1% annualized growth in Q2, along with other economic indicators such as jobless claims and core PCE price index data, will continue to drive market sentiment and gold price action.