Gold prices moved modestly higher on Thursday, recovering part of the previous session’s losses as the U.S. dollar steadied and renewed military conflict in the Persian Gulf revived investor concerns about persistent inflation and the prospect of higher interest rates.
Spot gold gained 0.7% to $4,104.22 an ounce, while U.S. gold futures also advanced 0.7% to $4,112.75 an ounce by 05:47 ET (09:47 GMT).
Fed Minutes Offer Some Support for Bullion
Gold found support after the release of minutes from the Federal Reserve’s June policy meeting.
According to analysts at Vital Knowledge, policymakers acknowledged there had been arguments in favour of raising interest rates last month, while also discussing the possibility of easing monetary policy later this year.
Higher interest rates typically weigh on gold because they increase the opportunity cost of holding non-yielding assets such as precious metals.
However, the minutes also revealed growing concern among Federal Reserve officials about elevated inflation. U.S. inflation has accelerated since the outbreak of the U.S.-Iran conflict in late February and remains comfortably above the Fed’s 2% target. Federal Reserve Chair Kevin Warsh reiterated the central bank’s commitment to restoring inflation to target during an event last week.
Fresh U.S.-Iran Clashes Lift Safe-Haven Demand
Gold entered Thursday after posting three consecutive daily declines as renewed military action between the United States and Iran sent oil prices sharply higher.
The rally in crude has revived concerns that higher energy costs could keep inflation elevated and delay any future interest-rate cuts.
The U.S. dollar also remained supported by inflation worries, with the dollar index holding close to the 13-month highs reached in June. A stronger dollar generally reduces the appeal of gold for investors using other currencies.
“Any rebound in energy prices will reinforce expectations that the Fed may keep interest rates higher for longer to combat stubbornly high inflation,” ANZ analysts said in a note.
On Thursday, the United States launched another round of strikes against Iran, hours after President Donald Trump declared that the ceasefire with Tehran was “over.”
Washington said the latest military action was carried out in response to Iranian attacks on vessels transiting the Strait of Hormuz.
Iran responded with separate strikes against what it described as U.S. military bases in Kuwait and Bahrain. The Islamic Revolutionary Guards Corps also warned that additional attacks on American military facilities in the Gulf would follow if further U.S. operations were launched.