Gold loses over 1% on US strikes against Iran

Gold prices lost more than 1% in European trading on Tuesday, resuming losses that were temporarily halted yesterday, under pressure from a stronger US dollar and rising global oil prices after the United States launched military strikes on Iranian sites, raising doubts about peace negotiations between Washington and Tehran.

The renewed rise in oil prices has revived inflation concerns in the United States, placing additional pressure on Federal Reserve policymakers and strengthening expectations of a US interest rate hike before the end of this year.

Price Overview

• Gold prices today: Gold prices fell 1.15% to $4,518.36, from the opening level at $4,570.55, and recorded a high of $4,580.36.

• At Monday’s settlement, gold prices rose 1.35%, marking the first gain in the past three sessions, supported by growing rapprochement between the United States and Iran.

US dollar

The dollar index rose around 0.2% on Tuesday, resuming gains that had paused in the previous session, and moving once again toward its highest level in six weeks, reflecting the rise of the US currency against a basket of major and minor currencies.

Demand for the dollar as a safe haven resumed after new US attacks on Iran increased doubts over the possibility of reaching an agreement to reopen the vital Strait of Hormuz and end the three-month-long Iranian war.

Global oil prices

Global oil prices rose by more than 3% on Tuesday, beginning to recover from five-week lows, amid renewed concerns that the Strait of Hormuz could remain closed to oil tankers, especially after the US military carried out strikes inside Iran.

Latest developments in the Iranian war

• The United States launched defensive strikes on boats and missile sites in Iran.

• US Central Command (CENTCOM) announced that the strikes came after monitoring Iranian movements to deploy boats intended to plant new naval mines in the Strait of Hormuz to threaten shipping, as well as missile sites that could target US warplanes.

• Iranian news agencies acknowledged hearing powerful explosions in Bandar Abbas and coastal areas.

• Iranian authorities confirmed that “the situation is fully under control,” signaling their commitment to the truce despite the US violations.

• The Iranian Foreign Ministry spokesman said that a US-Iran agreement is not imminent.

• An Iranian delegation led by chief negotiator Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi is visiting Doha for further talks regarding the potential peace agreement with the United States.

US interest rates

• According to the CME Group’s FedWatch tool, markets are currently pricing in a 56% probability that the Federal Reserve will raise interest rates in December, compared to just over 16% at the beginning of May.

• Markets are currently pricing a 99% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate hike stands at 1%.

• Investors are closely monitoring additional US economic data, along with comments from Federal Reserve officials, in order to reassess those expectations.

Gold outlook

Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “Even if a peace agreement is reached between the United States and Iran, the damage inflicted on oil production facilities in the Middle East may prevent oil flows from the region to the rest of the world from returning to normal quickly.”

SPDR Fund

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained virtually unchanged on Monday, keeping total holdings at 1,034.85 metric tons, the lowest level since May 8.