Gold and silver prices declined as renewed hostilities between the United States and Iran over the weekend pushed energy prices higher, stoking market expectations that central banks may need to raise interest rates to combat inflation.
The spot price of gold fell as much as 1.6%, nearing $4,050 per ounce, following a 1.4% drop last week. The situation for navigation in the Strait of Hormuz remains chaotic, with the U.S. denying Iran's claim that the waterway is closed until further notice. U.S. Central Command stated that American forces conducted a strike, the fourth in a week, in response to an attack on a container ship.
For gold traders, the escalation of conflict has raised concerns that the Federal Reserve may need to keep interest rates higher for longer to address persistent inflation. Minutes from the Fed's June meeting revealed that a minority of policymakers saw a case for raising rates, though the committee ultimately supported the decision to hold rates steady.
Overall, the meeting minutes reflected growing concern among U.S. central bank officials about inflation, alongside a slight easing of worries about the labor market. As precious metals offer no yield, higher borrowing costs typically weigh on them. On July 13, the price of silver fell by as much as 3.1%.
Hebe Chen, an analyst at Vantage Markets in Melbourne, noted that the resurgence of geopolitical tensions is impacting an already fragile gold market. She stated that unless the conflict around the Strait of Hormuz genuinely subsides, opening a new chapter for the precious metals market, high oil prices, rising yields, and a stronger U.S. dollar could continue to pressure gold this week.
As of 11:34 a.m. Singapore time, spot gold was down 1.5% at $4,058.18 per ounce, while silver fell 2.9% to $58.11 per ounce. Platinum and palladium prices also declined, and the Bloomberg Dollar Spot Index rose 0.2%.
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