Gold slips to near one-week low as US-Iran tensions lift oil, dollar

Gold prices eased on Wednesday to their lowest level in nearly a week as renewed US-Iran tensions pushed up oil prices and the dollar, strengthening expectations that inflation risks could keep interest rates elevated.

Spot gold fell 0.1% to $4,100.32 per ounce by 0107 GMT, after earlier touching its lowest level since July 2.

US gold futures for August delivery declined 1.1% to $4,112.50.

The move came after the US military launched a new wave of strikes against Iran on Tuesday and revoked a licence allowing Tehran to sell oil.

The action followed reports that three tankers were hit by projectiles in the Strait of Hormuz, increasing pressure on an already fragile ceasefire.

US oil prices rose nearly 3% in early trade, extending gains from the previous session.

The dollar also held near its highest levels of the week against most major currencies.

Markets increased expectations of a September Federal Reserve rate hike to more than 67%, compared with about 57% on Tuesday, according to the CME FedWatch tool.

Investors are also awaiting minutes of the Federal Open Market Committee’s June 16-17 meeting, due later on Wednesday, for further guidance on the interest rate outlook under new Federal Reserve Chair Kevin Warsh.

Gold is often seen as a hedge against inflation, but higher interest rates tend to weigh on the metal because it does not offer a yield.

A New York Fed report released on Tuesday showed US consumers became more concerned about near-term inflation pressures in June.

In China, the central bank reported its biggest monthly increase in gold reserves in more than two-and-a-half years in June, according to official data released on Tuesday, even as bullion prices fell.

Beijing and Hong Kong authorities also announced measures to strengthen currency, bond and gold trading in Hong Kong.

Hong Kong launched a central clearing system for gold on Tuesday and revived dollar gold futures trading.

Authorities are also considering yuan-denominated gold futures as part of efforts to build Hong Kong into a regional reserve hub for the precious metal.

Among other precious metals, spot silver fell 0.3% to $59.82 per ounce, platinum dropped 1.2% to $1,620.38 and palladium declined 1.6% to $1,256.25.