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Gold edges below $4,050 as Iran tensions revive inflation and rate-hike fears

Traders are pricing in nearly a 90% chance of a Fed hike by year-end, a backdrop that strengthens the US dollar and weighs on non-yielding bullion.

Reported · Written up by our desk · Major Pairs

Gold prices softened below the $4,050 level as the US dollar firmed heading into the European session, with the metal appearing vulnerable to extend its intraday slide.

FXStreet reports the move is linked to renewed US-Iran tensions, including reports of strikes by the US over the weekend and Iran missile attacks on US military bases in the Gulf. Iran also said it would close the Strait of Hormuz, with further IRGC activity cited in the area, lifting crude oil and reviving concerns about energy driven inflation.

The inflation worry is supporting expectations of higher interest rates by the US Federal Reserve, which tends to strengthen the dollar and divert flows away from gold. According to the CME Group FedWatch Tool, traders are currently pricing in a nearly 90% chance of a Fed rate hike by the end of this year, helping keep Treasury yields elevated.

The outlook also leaves gold exposed on the data front, with attention on Fed Chair Kevin Warsh's congressional testimony and upcoming US CPI and PPI releases. FXStreet adds that gold remains below its 200 day simple moving average and holds a bearish technical setup, suggesting rallies may be limited.

Latest closeGold $4,128.90 ▼0.0%|WTI crude $71.51 ▼0.8%

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