(Bloomberg) — Gold fell as an intervention-driven rally in the yen stalled, helping the dollar snap a five-day run of losses.
Bullion declined toward $4,050 an ounce, still on track for a narrow monthly gain in July, its first since February. The US dollar recovered ground against the yen on Friday, following a sharp decline triggered by Japan’s apparent intervention in the foreign-exchange market during overnight trading. A stronger US currency reduces the appeal of gold to many international buyers.
The yen, one of the main currencies the US dollar is measured against, advanced as much as 3.3% versus the greenback in New York trading on Thursday, the most on an intraday basis since December 2023. That pushed the Bloomberg Dollar Spot Index lower for the fifth consecutive session. But the US currency recovered on Friday as the Bank of Japan kept its policy settings unchanged, with Governor Kazuo Ueda offering little fresh support for the yen and authorities in Tokyo refraining from confirming any intervention.
Gold is down by more than a fifth since the US-Iran war began more than five months ago, with high energy prices stoking inflationary pressures and raising the likelihood that interest rates will stay higher for longer — a headwind for precious metals, which don’t pay interest. A wave of dip-buying has helped to keep the metal above the key level of $4,000 an ounce in recent weeks.
Looking ahead, bullion traders are continuing to seek clues to the Federal Reserve’s next policy steps. This week’s split decision in favor of preserving the current rate revealed conviction among some policymakers that higher borrowing costs will eventually be needed to meet the central bank’s inflation target of 2%.
Fed Chairman Kevin Warsh insisted the latest decision wasn’t a sign of inertia at the US central bank, saying that “if inflation continues to be elevated through the forecast period, interest rates could well be part of that solution, but I wouldn’t say it’s in isolation.”
The messaging from Warsh “is that inflation is not alarming, outside of the energy price effect,” said Helen Amos, an analyst at BMO Capital Markets Ltd. The “market’s assessment of inflation might be past its peak,” she said, adding that the Jackson Hole Economic Policy Symposium in late August, where the Fed chair often delivers a major policy address, may be the next big catalyst for gold.
In the Middle East, the US and Iran exchanged strikes again this week, with Washington hitting “dozens” of targets in Iran on Wednesday in response to attacks on American military bases in the region. Meanwhile, Saudi Arabia has discussed the formation of a multinational alliance to protect shipping in and near the Red Sea.
Spot gold fell 1.3% to $4,051.29 an ounce at 1:31 p.m. in New York, having added 0.9% in each of the previous two sessions. Silver shed 2.1%. Platinum and palladium declined.
–With assistance from Yvonne Yue Li.
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