Gold steadied Thursday after sliding to a two-month low in the previous session, as renewed tensions around the Strait of Hormuz kept inflation risks elevated and reinforced bets on another Federal Reserve rate hike this year. Resilient central bank buying, led by China, continued to cushion the metal's losses.
Gold prices steadied on Thursday after sliding to their lowest level since early August in the previous session, as renewed tensions around the Strait of Hormuz kept inflation risks elevated and reinforced expectations that the Federal Reserve could raise interest rates again this year.
By 09:32 ET (13:32 GMT), spot gold had advanced 0.5% to $4,129.25 an ounce, while gold futures had gained 0.3% to $4,153.25 an ounce.
Strait of Hormuz risk lifts energy costs
Iran has stepped up attacks on tankers crossing the Strait of Hormuz, adding to concerns over the security of a key global energy route. The White House is also considering possible military strikes against Iranian targets ahead of the U.S. midterm elections in November, according to media reports.
While oil flows from the Middle East briefly recovered to pre-conflict levels last month, the risks around Hormuz and the nearby Bab el-Mandeb Strait have pushed shipping costs to record highs. Neil Welsh, Head of Metals at Britannia Global Markets, said uranium enrichment rights remain "the main obstacle" in deadlocked U.S.-Iran nuclear talks.
A powerful storm near the U.S. Gulf coast also pressured energy supplies. Producers had shut more than fourth of current oil output and more than 16% of natural gas production as of Wednesday, according to data cited by Reuters. Surging energy prices have fueled inflation and contributed to tighter monetary policy, threatening to raise the opportunity cost of holding non-yielding assets like gold.
Fed minutes reinforce case for another hike
Fresh pressure on gold came from the Federal Reserve's latest meeting minutes. All 19 policymakers supported September's rate increase, and most saw another increase as appropriate by year-end, though few felt urgency to act this month.
Markets now price roughly a 20% probability of an October rate hike, but an 80% chance of one by December, according to CME FedWatch. Against this backdrop, the dollar has strengthened, making dollar-priced bullion more expensive for buyers using other currencies.
Central bank buying cushions losses
Still, resilient demand has provided an important source of support for gold. ANZ analysts said solid buying by central banks helped limit gold's losses. The People's Bank of China increased its gold reserves by 740,000 ounces in September, marking its 23rd consecutive month of accumulation.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
