Gold Steadies After Two-Month Low as Hormuz Tensions Fuel Fed Rate-Hike Bets

3 min read
Gold Steadies After Two-Month Low as Hormuz Tensions Fuel Fed Rate-Hike Bets
PrimeXBT Editorial Team
Reviewed by PrimeXBT

Topics in article

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.

Most traded markets

XAU / USD
+0.23% 4,120.33
BRENT
+4.42% 108.649
BTC / USD
-0.53% 82,388.7
EUR / USD
+0.12% 1.12080
USTEC
-0.46% 31,007.09
NVDA
-0.72% 235.85
View all markets

Author

PrimeXBT
Our Editorial Team consists of leading experts with a proven record in the fields of trading, cryptocurrencies, blockchain and finance. We thoroughly research the sources of information in order to provide readers with quality content that serves edu...
Read author’s articles
Alert Triangle Risk Disclaimer
Disclaimer: Some past publications may be outdated. We recommend following our news to stay up to date with the latest information. For any questions, feel free to contact our support team via the chat below.
The content provided here is for informational purposes only. It is not intended as personal investment advice and does not constitute a solicitation or invitation to engage in any financial transactions, investments, or related activities. Past performance is not a reliable indicator of future results.
The financial products offered by the Company are complex and come with a high risk of losing money rapidly due to leverage. These products may not be suitable for all investors. Before engaging, you should consider whether you understand how these leveraged products work and whether you can afford the high risk of losing your money.
The Company does not accept clients from the Restricted Jurisdictions as indicated in our website/ T&C. Some services or products may not be available in your jurisdiction.
The applicable legal entity and its respective products and services depend on the client’s country of residence and the entity with which the client has established a contractual relationship during registration.

Today in markets

Browse Commodities News

Register Now

Trading involves risk

Get started in minutes

Our clients love how fast and simple our sign-up is. It takes just a few minutes to get started!

Get Started Get Started
Get started in minutes

Need Help?

Risk Warning:
Trading in leveraged products carries a high level of risk and may not be suitable for all investors.