Gold prices declined during trading on Wednesday, July 15, as rising oil prices raised inflation fears and created uncertainty about interest rate expectations in America, casting a shadow over gold, which does not yield returns.
In trading, gold futures fell by about 0.8% to $4,038 an ounce, while the spot price of the yellow metal also declined by 0.6% to $4,030 an ounce.
Gold jumped more than 2% to $4,100.49 an ounce on Tuesday, recovering from a two-week low after data showed that US consumer price inflation slowed more than expected in June as energy prices declined.
Oil prices continued their gains for the third consecutive session, after US President Donald Trump reimposed a naval blockade on all Iranian ports and threatened to target power plants and bridges next week unless Tehran resumes negotiations, in the latest US escalation of the conflict.
“I think the market has now moved beyond the Consumer Price Index data, which is a somewhat lagging indicator,” said OANDA market analyst Kelvin Wong in a note quoted by Reuters. “Trump continues to impose a blockade on ships leaving the Strait of Hormuz, causing oil prices to rise and putting gold under pressure.”
Higher crude oil prices could exacerbate concerns about inflation and keep interest rates high for longer. Gold is typically seen as a hedge against inflation, but it loses its appeal during periods of high interest rates because it does not offer a return.
The chairman of the US Federal Reserve pledged to Congress on Tuesday to eliminate inflation and get monetary policy right, asserting that the five-year wave of rising prices would become a thing of the past.
