Gold prices are struggling for direction above the $4,050 level as uncertainty over US-Iran tensions supports the US Dollar. Iran denied any negotiations with the US, and its Revolutionary Guard reportedly attacked a US base in Kuwait with drones, while a senior adviser warned Tehran would target US warships if the Strait of Hormuz is not reopened on its terms. These developments, along with Houthi naval blockades, have helped oil prices recover and kept inflation risks alive, reinforcing bets that the Federal Reserve will raise rates—markets now price over a 60% chance of a September hike and more than 85% by year-end. The US ISM manufacturing PMI hit a more than four-year high in July, further favoring the Dollar and capping gold. Traders are now awaiting Friday’s Nonfarm Payrolls report for further clues on the Fed’s policy path, though the fundamental backdrop suggests the path of least resistance for bullion remains to the downside.
Fed rate hike bets increase, pushing policy rate higher.
Fed rate hike expectations and strong ISM data boost yields, lowering bond prices.