Ricardo Evangelista – Senior Analyst, ActivTrades
The gold price rose slightly on Tuesday morning, climbing to just over $4,500 per ounce. The precious metal had come under pressure the previous day, losing more than two percent following the recent surge in oil prices.
Higher energy costs are fueling expectations of rising inflation, leaving little room for interest rate cuts and increasing the likelihood of further rate hikes by the Fed and other major central banks. Recent developments in the confrontation between the US and Iran in the Persian Gulf, including US military strikes against vessels and reports of Iranian retaliatory drone attacks, suggest that there is currently no realistic path toward resolving the conflict or reopening the Strait of Hormuz.
Against this backdrop, oil prices are likely to remain volatile, with the trend continuing to point upward. This is expected to reinforce expectations of a restrictive Fed monetary policy, support the dollar, and drive US Treasury yields higher, which should limit gains for non-interest-bearing assets such as gold.
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