Hormuz Tensions Weigh on Gold Prices Amid Fed Rate Speculation
Gold prices remained steady on Friday as traders assessed the impact of a reported Iranian attack in the Strait of Hormuz on US interest rates. The attack, which targeted 'hostile targets' in the critical waterway, has raised concerns about the potential for a broader conflict and its effects on inflation and borrowing costs. Despite this, US President Donald Trump expressed optimism that the war would end 'pretty soon' and that the US was in control of the strait.
Gold prices had briefly spiked above $4,300 an ounce on Thursday due to hopes that the Hormuz situation would resolve, but concerns about higher interest rates have revived speculation that the Federal Reserve may need to raise borrowing costs. The Fed's Bank of St Louis president Alberto Musalem emphasized that policymakers cannot afford to tolerate higher inflation while waiting for stronger productivity growth.
Gold has fallen by nearly a fifth since the US-Iran war began in late February, as energy prices soared and stoked inflationary pressures. Spot gold was trading at $4,246.29 an ounce on Friday, with silver rising 0.1% to $61.59 an ounce.