NEW YORK: Gold fell on Tuesday as investors monitored escalating hostilities in the Middle East that sent oil prices higher, and braced for minutes from the US Federal Reserve’s June meeting for guidance on the monetary policy outlook.
Spot gold was down 0.6 percent at USD4,138.39 per ounce by 11:55 a.m ET (1555 GMT), while U.S gold futures for August delivery fell 0.5 percent to USD4,148.50. Bullion hit a two-week high on Monday as a softer-than-expected U.S jobs data last week prompted markets to dial back near-term interest rate-hike expectations.
However, “I think the reality is setting in that the Fed is still very much focused on reigning in inflation - so higher for longer still seems the most likely Fed path,” said Peter Grant, vice president and senior metals strategist at Zaner Metals. Traders still expect a 60 percent chance of a rate hike in September, according to the CME FedWatch Tool.
Attention is now turning to the Fed’s meeting minutes, scheduled for release on Wednesday. In the Middle East, two tankers were hit in the Strait of Hormuz and Iran said there would be no more peace talks unless US President Donald Trump halted his repeated threats to restart the war.
Oil prices edged higher following the news. Gold often comes under pressure when inflation concerns keep interest rates elevated, reducing the appeal of non-yielding assets such as bullion.
Meanwhile, China’s central bank maintained gold purchases for a 20th straight month, with its reserve hitting 75.44 million fine troy ounces by the end of June, up from 74.96 a month earlier.
Hong Kong launched a central clearing system for gold on Tuesday and also revived gold futures trading as it seeks to become a regional reserve hub for bullion. Among other metals, spot silver dropped 2.6 percent to USD60.46 per ounce. Platinum rose 0.5 percent to USD1,639.18, and palladium gained 0.1 percent to USD1,271.33.
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