Gold prices eased on Thursday after reaching a two-week high in the previous session, as rising oil prices linked to escalating Middle East tensions increased inflation concerns and raised expectations of a more cautious stance from the US Federal Reserve.
Spot gold fell 0.6% to US$4,103.39 per ounce by 0713 GMT, after climbing to US$4,165.87 on Wednesday, its highest level since July 7. US gold futures for August delivery also declined 1.1% to US$4,106.40.
The decline came as crude oil prices climbed to their highest level in more than six weeks following renewed military tensions involving the US, Iran and Yemen’s Houthis, which raised concerns over potential disruptions to global energy supplies.
Jigar Trivedi, senior research analyst at IndusInd Securities, said higher oil prices were adding pressure on inflation expectations and increasing the likelihood of future US rate hikes, limiting gold’s upside momentum.
The US dollar weakened 0.1%, making dollar-denominated gold more affordable for holders of other currencies. However, two-year US Treasury yields climbed to a 17-month high as investors assessed the impact of higher energy prices on inflation.
Markets are now focused on the Federal Reserve’s policy meeting next week, with the central bank widely expected to keep interest rates unchanged. Futures markets are pricing in a 77% chance of a rate increase in September, according to the CME FedWatch Tool.
Meanwhile, RHB Investment Bank Bhd (RHB Research) noted that gold’s bullish momentum has strengthened after COMEX gold surged US$75.50 to close at US$4,151.90 in the previous session.
RHB Research said the commodity has been forming a series of higher lows, signalling improving momentum, with immediate support emerging at US$4,000 and resistance seen at US$4,200.
However, the research house maintained a bearish trading bias, expecting stronger resistance at US$4,400. RHB Research said it would retain its short position initiated at US$4,605.70, with a stop-loss level set at US$4,400.
The research house identified US$3,850 as the next downside support level if gold fails to hold above the US$4,000 mark.
