Investing.com– Gold prices rose in Asian trade on Wednesday as markets digested fresh military action between the U.S. and Iran, while focus also turned to the minutes of the Federal Reserve’s June meeting.
Bullion recovered after falling sharply in the prior session, as renewed tensions in the Middle East sent oil prices surging and rekindled concerns over sticky, energy-fueled inflation.
rose nearly 0.6% to $4,128.81 an ounce by 01:58 ET (05:58 GMT), while fell 0.4% to $4,139.41/oz.
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Gold recovers after Iran tensions spark deep losses
Spot prices had tumbled 1.6% on Tuesday after a flare-up in U.S.-Iran tensions boosted the dollar and sparked heightened concerns over inflation and interest rates.
Washington launched fresh attacks on Iran and also revoked allowances on Iranian oil exports, in response to Tehran’s attacks on vessels in the Strait of Hormuz.
The development raised questions over a June framework deal between the U.S. and Iran, and whether the two can reach a more comprehensive agreement. Still, Washington signaled that negotiations were continuing with Iran.
Oil prices rose sharply after the fresh strikes, bouncing from annual lows and spurring renewed concerns over energy-driven inflation in the coming months.
U.S. inflation data since March has shown a steady increase in price pressures, leaving markets on edge over a hawkish Fed.
“While geopolitics would normally offer some support for gold, the latest move has worked more through the oil, inflation and rates channel,” OCBC analysts said in a note.
“Unless oil stabilises or Fed/rates concerns ease, rallies in gold and silver may still struggle to sustain.”
Other precious metals weakened on Wednesday, and remained under pressure. fell 0.3% to $61.145/oz, while spot platinum fell 0.2% to $1,639.60/oz.
Fed minutes in focus for more rate cues
Beyond geopolitics, focus on Wednesday is on the of the Fed’s June meeting, which are set to offer more cues on the central bank’s plans for rates.
Speculation over monetary policy has been a major driver of gold since mid-June, with the yellow metal even gaining some ground after soft payrolls data dented the outlook for potential rate hikes this year.
Still, the Fed had struck a hawkish tone during its June meeting, with several policymakers supporting the notion of higher rates– a scenario that bodes poorly for non-yielding assets like gold.
The Fed minutes will be closely watched for more insights on the Fed’s thinking, while the tone of communications under new Chair Kevin Warsh will also be in focus.
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