Gold fell to near $4,000 an ounce after the United States and Iran exchanged attacks in the waters of the Arabian Gulf, putting pressure on the ceasefire that last week pushed energy prices back to pre-war levels and lowering expectations of an interest rate hike.
Spot gold fell as much as 1.2% after rising more than 2% in the previous two sessions. Oil prices advanced at the start of trading on Monday after a tanker carrying Qatari crude was struck during a weekend of tit-for-tat attacks between Washington and Tehran that disrupted shipping through the Strait of Hormuz.
Since then, oil has pared its gains after both sides agreed to halt attacks before peace talks resume this week.
Justin Lin, an analyst at Global X ETFs Australia, said that gold remaining above $4,000 despite renewed signs of tension in the Strait indicates that marginal bargain buyers are back and ready to defend this level. He added: “I expect gold to become more resilient to Middle East volatility, especially now that it has completely erased its gains since the beginning of the year, and it is likely that investors seeking quick profits have largely moved on to other destinations.”
Gold amid Hormuz tensions and US inflation data
The latest developments in the Middle East come on the heels of US inflation data that, while rising, was in line with analysts' expectations. Treasury yields fell after the US personal consumption expenditures price index, the Federal Reserve's preferred inflation gauge, rose 0.4% in May compared to the previous month.
The price of gold has lost about 23% since the United States and Israel launched strikes on Iran in late February, as higher energy prices have fueled inflation and raised expectations that central banks will keep interest rates high for longer, a negative factor for gold, which does not yield returns.
In the latest trading, spot gold fell 1.1% to $4,044.79 an ounce by 1:34 p.m. Singapore time. Silver dropped 2% to $58.99. Platinum and palladium also declined, while the Bloomberg Dollar Index was flat.
