(Bloomberg) — Gold held a three-day decline, as fresh attacks on ships in the Middle East added to inflationary risks and raised prospects for a US interest-rate hike.
Bullion was little changed near $4,350 an ounce, having dropped 2.6% over the last three sessions. US forces destroyed five Iranian tankers carrying crude near Kharg Island, the Islamic Republic’s main oil export hub, in response to attempted missile attacks on an American warship. That raised fears of an escalation in the months-long war and spooked energy markets.
Oil extended gains, with benchmark Brent crude close to $100 a barrel. That’s adding momentum to the case for a rate hike less than a week before the Federal Reserve’s Sept. 14-15 meeting. Traders are eyeing key inflation prints due this week for fresh clues to the central bank’s next move.
“A softer reading will be a relief for gold traders” as it would support the case for holding rates steady, said Ahmad Assiri, a market strategist at Pepperstone Group Ltd. “The greater risk lies in an upside inflation surprise, which would likely strengthen the case for a hike, creating what could be massive pressure on the precious metal,” he added.
Tighter monetary policy is typically a headwind for gold, which doesn’t pay interest. Swaps traders are pricing in a roughly 60% chance of a Fed rate increase this month.
Since bouncing from a floor near $4,000 an ounce in July, gold has settled in a relatively narrow range either side of $4,400, as traders repeatedly recalibrate the outlook for Fed policy. Despite near-term headwinds, many investors are still betting that bullion will grind higher as it rediscovers its traditional value as a portfolio hedge.
“For now, gold’s low-volatility consolidation around $4,400 appears more like a market waiting for clarity to decide where to go next,” Assiri said. “The CPI outcome could provide the needed catalyst for the next meaningful move.”
Spot gold edged down 0.1% to $4,352.14 an ounce at 7:16 a.m. in Singapore. Silver slipped 0.2% to $65.63 an ounce. Platinum was flat, while palladium fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.1% lower.
More stories like this are available on bloomberg.com
