Gold prices in the European market declined on Thursday, giving up their highest levels in ten weeks recorded earlier in Asian trading, due to profit-taking and corrective activity, in addition to the pressure of the continued rise in US dollar levels and the rise in oil prices due to the complex negotiations between the United States and Iran over the Strait of Hormuz.
Moderate data on core US inflation has reduced the likelihood of the Federal Reserve raising interest rates this year, and in order to reprice those prospects, investors are awaiting further US inflation data.
Price overview
Gold prices today: Gold prices fell by 1.0% to ($4,364.20), from the opening level of trading at ($4,408.93), and recorded a high of ($4,449.81), the highest level since June 5.
At Wednesday's settlement, gold prices rose 0.9%, their third gain in the last four days, thanks to active investment demand for the precious metal.
US dollar
The dollar index rose 0.1% on Thursday, extending its gains for the fourth consecutive session, reflecting the continued rise in the US currency against a basket of global currencies.
The US dollar is rising amid continued uncertainty surrounding negotiations between the United States and Iran over the Strait of Hormuz, with reports indicating ongoing disagreements over the mechanism for regulating international navigation and security guarantees in the vital waterway.
global oil prices
Oil prices rose by about 0.5% on Thursday, resuming their upward trend after a brief pause the previous day as part of a correction from a two-week high. This rise comes amid ongoing uncertainty surrounding the Strait of Hormuz agreement between the United States and Iran, and persistent concerns about the security of oil supplies from the Middle East region.
Undoubtedly, rising global oil prices are renewing fears of accelerating inflation, which could prompt global central banks to raise interest rates in the near term.
Hormuz Updates
US President Donald Trump said the United States has total control of the Strait of Hormuz, and hinted that Washington may retain that control.
Iran denies that the United States controls the strait, and has asserted that Hormuz will remain closed until Washington responds to its demands.
Indirect contacts are continuing through intermediaries, but disagreements over the terms for reopening the strait and US commitments are hindering the achievement of a final agreement.
An Iranian official said his country wants Washington to return to the terms of the previous interim agreement and set a timetable for implementing the commitments.
An Iranian source: There are no discussions between Iran and the United States regarding extending the ceasefire.
Sources: Optimism on the part of the Pakistani mediator regarding extending the ceasefire, which has been in place for sixty days, to another 60 or 90 days.
Ship traffic through the Strait of Hormuz has fallen to its lowest level in three months (only about 6 to 8 ships per day compared to 140 ships before the war).
US interest rate
US consumer price data for July came in mostly moderate in line with market expectations, indicating easing pressure on the Federal Reserve.
Following that data, and according to the CME Group’s FedWatch tool: the pricing of the probability of the Federal Reserve keeping interest rates unchanged at its September meeting rose from 52% to 64%, and the pricing of the probability of raising interest rates fell by about 25 points from 48% to 36%.
The pricing of the probability that the Federal Reserve will leave interest rates unchanged at its December meeting rose from 24% to 28%, while the pricing of the probability of an interest rate hike fell by about 25 points from 76% to 72%.
In order to reprice those probabilities, investors are awaiting the release of US producer price data for July later today.
Gold performance forecast
Here at FX News Today, we predict: If producer price data comes in lower than market expectations, the likelihood of the Federal Reserve raising interest rates this year will decrease, which will push gold prices higher again and record new multi-month highs.
SPDR Fund
Holdings of gold at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by about 3.14 metric tons on Wednesday, the seventh consecutive daily increase, bringing the total to 1,025.81 metric tons, the highest level since June 3.
