Gold falls back below $4,000, pressure from renewed Strait of Hormuz blockade and hawkish Fed
Gold prices fell as rising tensions in the Strait of Hormuz and comments from a Federal Reserve official raised the possibility of raising interest rates to curb inflation. Spot gold is now back below $4,000 an ounce; it fell nearly 3% on Monday, its biggest drop in more than two weeks. After the US military re-imposed a naval blockade on Iranian ports and opened fire for days, US President Donald Trump proposed a 20% compensation for goods transported through the waterway. Recommended reading: The United States will resume its blockade on Iran and Trump plans to charge 20% compensation for shipments in the Strait of Hormuz Oil prices rose further, and the resurgence of gunfire in the Middle East has reignited concerns about crude oil supplies in the region. High energy prices have boosted expectations that the Federal Reserve may need to keep interest rates higher for longer to combat stubborn inflation. And Federal Reserve Governor Christopher Waller said that if underlying inflation continues to indicate widespread price pressures, policymakers may need to raise interest rates in the near future. Currently, swaps traders expect a 43% chance of the Fed raising interest rates in July, up from nearly 40% before his speech. Rising interest rates are bad for precious metals, which do not yield interest. Traders will be closely watching Federal Reserve Chairman Kevin Warsh's first congressional hearing as Fed chief later on Tuesday for clues on the central bank's interest rate outlook. The Bureau of Labor Statistics' consumer price index for June will also be released. Spot gold fell more than 0.3% to near $3,990 an ounce. Silver prices fell 0.7% to $57.3 an ounce. The Bloomberg Dollar Spot Index was essentially flat, having closed up 0.3% in the previous session. Open a futures account on Sina's cooperative platform, safe, fast and guaranteed