Middle East Tensions Fuel Rate Hike Case, Gold Prices Hold Steady
Gold prices held steady near US$4,350 an ounce on Wednesday as fresh tensions in the Middle East boosted the case for a US interest rate hike. The precious metal had been declining over the last three sessions by 2.6 per cent.
The escalation of the conflict in the region came after US forces destroyed five Iranian tankers carrying crude near Kharg Island, the main oil export hub of Iran's Islamic Republic. This move raised fears of a wider war and sent energy markets into turmoil, with Brent crude rising close to US$100 a barrel.
Bullion traders are awaiting key inflation prints due this week for fresh clues on the Federal Reserve's next move. A softer reading will be seen as relief by gold traders, supporting the case for holding rates steady, according to Ahmad Assiri, a market strategist at Pepperstone Group.
Tighter monetary policy is typically bearish for gold, which does not pay interest. Swaps traders are pricing in a roughly 60 per cent chance of a Fed rate increase in September.