Gold prices moved back above the psychologically important US$4,000-an-ounce level as investors assessed escalating tensions in the Middle East and their potential impact on global inflation and US monetary policy.
Spot gold (XAU/USD) rose 0.4% to approximately US$4,027.38 an ounce, while gold futures gained 0.30% to US$4,027.9. Silver advanced 0.9% to US$56.93 an ounce, whereas platinum eased 0.2% to US$1,594.30.
Geopolitical uncertainty continued to support demand for defensive assets. Markets monitored fresh US strikes on Iranian targets, along with renewed threats to regional shipping routes. Yemen’s Iran-backed Houthi movement reportedly threatened a maritime blockade against Saudi Arabia, prompting additional measures to safeguard shipping through the Red Sea.
However, reports that mediators were discussing proposals to reduce hostilities, including a possible temporary halt in strikes, helped moderate concerns about an immediate escalation.
Investors are also assessing how higher oil and commodity prices could affect inflation. A prolonged increase in energy costs may make it more difficult for the US Federal Reserve to ease monetary policy, potentially keeping interest rates elevated for longer.
The Federal Reserve is widely expected to leave interest rates unchanged at its upcoming policy meeting. Nevertheless, markets will closely examine its guidance for indications of how policymakers view the inflationary effects of rising energy prices. Swap markets continue to indicate the possibility of at least one interest-rate increase before the end of the year, despite recent signs of slower US economic growth.
Higher real yields, a stronger US dollar and increasingly hawkish interest-rate expectations may restrict gold’s near-term upside. Conversely, sustained geopolitical uncertainty and continued central-bank purchases could provide longer-term support.
For Australian investors, movements in the Australian dollar will also remain important. Because gold is generally priced in US dollars, a weaker Australian dollar can increase the local-currency gold price and potentially support the earnings outlook for ASX-listed gold producers.
Gold has recently traded within a relatively narrow range around US$4,000 after falling 14% during the second quarter, its weakest quarterly performance since 2013. The near-term direction is likely to depend on Middle East developments, energy prices, the US dollar and the Federal Reserve’s policy outlook.
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