Gold prices weakened on Wednesday (July 8th) after tensions between the United States and Iran escalated again. XAU/USD traded around US$4,050 per troy ounce, down around 1.40% on the day.
Pressure on gold arose as investors again sought the US dollar as a safe haven. Typically, geopolitical tensions can support gold. However, this time, the market was more focused on the risk of rising energy prices, which could trigger renewed inflation.
Market sentiment worsened after US President Donald Trump said that the memorandum of understanding to end the conflict with Iran was now “over.” Trump also stated that he no longer wanted to deal with Iran. This statement heightened fears of conflict and pushed up oil prices.
Tensions escalated after the US attacked Iranian military infrastructure in response to attacks on commercial vessels in the Strait of Hormuz. This waterway is crucial for global oil shipments, so any disruption in the region could immediately trigger concerns about global energy supplies.
For gold, rising oil prices pose indirect pressure. If energy prices remain high, inflation could struggle to reduce. This situation could force the Federal Reserve to maintain high interest rates for longer, which is less favorable for gold because the precious metal does not provide a yield.
Now, the market focus is on the minutes of the Fed’s June meeting, which will be released on Wednesday. Investors are eager to see whether the US central bank maintains its hawkish tone or begins to adopt a more cautious stance. As long as the dollar and US Treasury yields remain strong, gold risks being held under pressure despite increasing geopolitical risks.
Source: Newsmaker.id