Gold prices have taken a hit as geopolitical tensions between the US and Iran escalate, coupled with rising fears of a US interest rate hike. Spot gold fell 0.4% to $4,313.11 per ounce by 0302 GMT, while US gold futures for August delivery were down 0.7% at $4,336.30.
Geopolitical Tensions
Fresh geopolitical tensions have emerged in the Middle East after the US military reported Iranian missile attacks targeting Bahrain, Kuwait, and other locations. These developments have highlighted the lack of progress in diplomatic efforts between Washington and Tehran.
Supply Side Intelligence
The ongoing tensions have led to a rise in crude oil prices, further fueling inflation concerns. This situation has been exacerbated by Israel's military actions in Iran, which have added to the geopolitical instability in the region.
Demand Side Intelligence
The US economy's strong job gains in May have increased the likelihood of a Federal Reserve rate hike. The yield on the benchmark 10-year US Treasury note rose, increasing the opportunity cost of holding non-yielding bullion. Kelvin Wong, a senior market analyst at OANDA, noted, "It is all based on the hawkishness that the market has started to place on the Fed futures."
"Higher interest rates tend to weigh on the non-yielding metal," said Kelvin Wong.
Price Outlook
Markets are pricing in a Federal Reserve rate hike before year-end, with a 72% chance of a move by December, according to CME Group's FedWatch tool. The upcoming Federal Reserve meeting and further developments in the US-Iran situation will be closely watched by traders.
| Commodity | Spot Price | Futures Price |
|---|---|---|
| Gold | $4,313.11 | $4,336.30 |
| Silver | $67.56 | - |
| Platinum | $1,767.15 | - |
| Palladium | $1,225.66 | - |
