Gold Prices Near $4022 an Ounce

SadaNews - Gold maintained its decline, as escalating hostilities in the Strait of Hormuz led to a surge in energy costs, while comments from a U.S. monetary policymaker increased the likelihood of interest rate hikes to contain inflation.

The precious metal traded near $4022 an ounce after losing 2.9% on Monday.

President Donald Trump reinstated a blockade on Iran and called for a 20% compensation on other shipments passing through the Strait of Hormuz, while both sides exchanged strikes.

Oil and European natural gas prices surged, raising concerns about inflation that could prompt monetary tightening, which hurts gold that does not yield returns.

In the United States, Christopher Waller, a member of the Federal Reserve Board, stated that policymakers might need to raise interest rates in the near term if core inflation continues to signal widespread price pressures.

In the options market, the implied market probability of a quarter-point rate hike later this month rose to about 50% from under 10%.

Gold extended its declines this month after losing 14% in the second quarter, marking its worst performance since 2013. The decline was driven by growing expectations that the Federal Reserve may be compelled to tighten policy, alongside gains in the U.S. dollar and Treasury yields.

Holdings in gold-backed exchange-traded funds fell to their lowest level since September last week, putting pressure on prices.

Inflation Data and Waller's Testimony in Market Focus

Later on Tuesday, traders will closely watch U.S. consumer price data for June, alongside Kevin Waller's first appearance before Congress as Federal Reserve Chair, seeking indicators of the central bank's interest rate outlook.

Christopher Wong, a strategist at Oversea-Chinese Banking Corp, noted regarding the data and testimony that gold has been "holding near $4000, but markets may be looking for signs."

He added that "the near-term gold environment remains challenging if oil prices stay high and yields continue to rise."

Spot gold rose 0.3% to $4013.60 an ounce at 10:13 AM in Singapore, after falling by as much as 0.5% earlier. Silver steadied near $57.55 an ounce.

Platinum dipped slightly, while palladium rose, and the Bloomberg U.S. Dollar Spot Index, a measure of the strength of the American currency, fell 0.1% after closing the previous session up 0.3%.