Gold Steady as Traders Assess Impact of Hormuz Flare-Up on Rates

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Or sign-in if you have an account.9q1vamolv8}um]u7kifypk{r_media_dl_1.png Bloomberg(Bloomberg) — Gold moved in a narrow range as traders assessed the impact of a reported Iranian attack in the Strait of Hormuz on the Federal Reserve’s path for interest rates. 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Local media reported that Iran struck “hostile targets” in the critical waterway and would seek to bar US and Israeli vessels from passing through. Tehran had earlier said a pact with Oman on opening shipping lanes was in the final stages. Separately, the Houthi militant group said it conducted a “large-scale” attack against forces from Yemen’s Saudi-backed government, raising concerns about a broadening of the war into a region-wide conflict. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againDespite the attacks, President Donald Trump told reporters at the White House on Thursday that he thinks the war will end “pretty soon” and that the US is in control of the strait. Bullion was still on track to end the week almost 5% higher, briefly spiking above $4,300 an ounce on Thursday on optimism over Hormuz reopening. That rally proved to be short-lived, as the subsequent ratcheting up of tensions has revived speculation the Fed may need to raise rates to contain consumer prices. Higher rates are typically negative for gold as it pays no interest.Gold isn’t reacting strongly to the latest flare-up because its early-week rally wasn’t entirely driven by deescalation, said Justin Lin, an analyst at Global X ETFs, “The original move looked like a technical breakout with some borrowed momentum from the Iran negotiation and doubts around Fed hawkishness,” he said. Currently it is “more about buyers taking back control rather than a strict reaction to the Middle East talks,” he added.Traders priced in roughly 60% chance of a hike in September after the Financial Times reported Chairman Kevin Warsh would be prepared to raise borrowing costs if inflation readings run hot in coming weeks. The Fed’s Bank of St. Louis President Alberto Musalem said policymakers cannot afford to tolerate higher inflation while they wait for the possibility of stronger productivity growth.Gold has fallen by nearly a fifth since the US-Iran war began in late February after the conflict sent energy prices soaring, stoking inflationary pressures and raising the likelihood that rates will stay higher for longer. Spot gold fell 0.1% to $4,233.95 an ounce at 8:52 a.m. in Singapore. Silver fell 0.5% to $61.25 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, was flat after rising 0.2% on Thursday.—With assistance from Wendy Wells.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.