Gold prices rose slightly after hitting a nine-week low, as renewed tensions in the Middle East fueled inflation fears and increased expectations of another US interest rate hike at least this year.
The price of the precious metal rose by as much as 0.8% to hover near $4,140 an ounce, after ending the previous session at its lowest level since early August. A tanker was attacked with projectiles off the coast of Qatar on Wednesday, a rare attack in the heart of the Arabian Gulf, while the White House is reportedly considering options for military strikes against Iranian targets ahead of the midterm elections in November.
Despite a slight rise on Thursday, the price of gold has fallen by about 20% since the outbreak of war between the United States and Iran in late February, as rising energy costs have fueled inflation and prompted central banks to begin tightening monetary policy, a negative factor for the precious metal that does not yield returns.
While estimates suggest that oil flows from the Middle East have returned to levels close to pre-conflict levels, heightened risks have pushed shipping costs to record highs. A storm in the Gulf of Mexico has also added to the strain on energy supplies.
The Federal Reserve and the dollar are increasing pressure on gold.
The minutes of the Federal Reserve's most recent meeting showed that all 19 policymakers supported the September interest rate hike, and most anticipated another increase would be appropriate by the end of the year. Investors are now pricing in a roughly 20% probability of a rate hike at the Fed's next meeting in late October, compared to an 80% probability in December.
This also provided support for the dollar, with the Bloomberg Dollar Spot Index nearing its highest level this year. A stronger dollar typically makes gold more expensive for most buyers.
Hebei Chen, senior market analyst at Vantage Global Prime, said the Fed minutes kept gold under a stubborn ceiling as policymakers remained united in their battle against inflation, but were divided over whether the September rate hike was a precaution or the start of a more aggressive monetary tightening campaign.
Spot gold rose 0.5% to $4,132.53 an ounce at 11:27 a.m. in Singapore, while silver gained 0.3% to $59.97, after falling 2.5% in the previous session. Platinum and palladium also rose. The Bloomberg dollar index was steady after rising 0.3% the previous day.
