US Inflation Eases, But Gold Under Pressure from Ongoing Tensions and Higher Energy Prices

The US inflation rate cooled slightly in July, but gold prices are still under pressure due to sticky inflation and tensions between the US and Iran. The annualized US consumer price index eased to 3.4% from 3.5% in June, in line with projections. However, higher energy prices could encourage the Federal Reserve to keep interest rates elevated for longer, increasing the opportunity cost of holding non-yielding bullion.

According to CME FedWatch, there's a roughly 56% chance that the Federal Reserve will opt to keep rates steady in September, while 44% are anticipating a quarter-point rate hike. The conflict between the US and Iran has been ongoing for 166 days, with tensions escalating after a top adviser to the commander of Iran's Islamic Revolutionary Guard Corps said Iran could prolong the war until President Donald Trump is out of office.

Oil prices are ticking up as Iran hardens its stance over control of the Strait of Hormuz and other demands to end the war. The global oil benchmark, Brent crude, rose around 1% before paring gains to trade 0.2% higher at $89.12 a barrel. Meanwhile, gold futures are facing significant selling pressure above the key resistance at $4,494.66, tested yesterday, signalling exhaustion likely to continue.