Gold Edges Lower as Renewed Middle East Conflict Boosts Fed Rate Hike Expectations
Gold prices dipped on Monday as new tensions in the Middle East drove both oil prices and Treasury yields upward, stoking inflation fears and possible the Fed's interest rate hike in September.
Bullion declined 0.27% while US crude oil pushed past $85 per barrel. Markets are now pricing in better than 60% odds of a September rate hike, following Fed Chairman Kevin Warsh's pledge to keep fighting inflation.
Despite Monday's dip, gold is still tracking roughly a 10% gain for August, putting it as its best monthly performance since January, a rally fueled by renewed interest in the debasement trade, as the US Treasury unveiled plans to expand its bond buyback program.
Nicky Shiels, who is currently heading the research and metals strategy at MKS PAMP SA, has said that the dynamic between the two entities (the Fed and Treasury) as a "tug of war" in a client note, adding that she expects the debasement trade to keep gold supported heading into September.
Separately, tensions escalated in the Middle East as the US and Iran traded military aggressions for the first time in roughly past 30 days, with U.S. president Donald Trump indicating that the U.S. would push back against any Iranian agressions.
Gold price was down 0.27% at $4,446 an ounce after the New York trading session. Silver dipped slightly, but still trading at $66.50 per ounce after the same today's trading session. It remains to be seen if the precious metals can get their momentum back this week.
Related assets: Gold, Silver, Palladium, Platinum