The Zhitong Finance App notes that as the Middle East conflict widens, increasing the upward pressure on energy prices and boosting expectations that the Federal Reserve will tighten monetary policy to contain inflation, gold prices have declined.
After falling 2% on the previous day, the trading price of spot gold hovered around $4,050 an ounce, erasing most of the gains of the previous two trading days (mainly driven by dips).
After the cease-fire agreement signed last month essentially broke down, the war entered a new phase of escalation. US Trump threatened to step up the attack on Iran and said he would hold Iran responsible for any future attacks on ships by the Yemeni Houthis in the Red Sea.
Benchmark Brent crude broke through the $100 mark for the first time since May, while two-year US Treasury yields rose for the sixth day in a row on Thursday.
Gold prices are expected to rise slightly this week
Adding to the uncertainty, the US announced that it would impose tariffs of 10% to 12.5% on imported goods from most major trading partners, alleging forced labor in its supply chain. This is the broadest move Trump has taken to restore his protectionist tariff system since earlier tax measures were overturned by the Supreme Court.
Higher energy prices, combined with a seemingly resilient US labor market, have increased the possibility that the Federal Reserve will raise interest rates. Rising borrowing costs are a negative factor for precious metals that don't pay interest.
Analysts at TD Securities, including Ryan McKay, said in a report that as energy prices soared and concerns about inflation resurfaced, KuaiQian had “quickly re-transformed into a gold seller.” They added that for silver, a drop below $55.19 an ounce could trigger a fresh sell-off.
Swap traders currently expect a 34% chance that the Federal Reserve will raise interest rates at next week's meeting. Interest rates are expected to be raised at least once in September, and a second rate hike is likely before the end of the year.
Since late June, gold has basically been hovering around $4000, which some traders see as a key support level. Since the US and Israel launched an attack on Iran in late February, the price of gold has fallen by about a quarter; in the previous month, the price of gold had reached a record high of nearly 5,600 US dollars, ending a years-long bull market.
As of press time, spot gold was basically flat at $4048.25 an ounce. Silver remained flat at $57.62 an ounce after falling 3.6% on the previous trading day. Platinum and palladium traded slightly lower. The Bloomberg Dollar Spot Index fell slightly after rising 0.3% on Thursday.