Spot Gold pulled back from a 2-week peak on Thursday, as the US Dollar appreciated after US President Donald Trump’s prime-time address.
A firmer dollar makes dollar-priced Gold less appealing to international investors holding other currencies.
Trump warned that Iran would be hit extremely hard over the next two to three weeks and “would be brought to the Stone Age if no deal is reached.” Trump also stated that Iranian energy infrastructure remained a potential target.
These remarks curbed expectations for any near-term de-escalation of tensions in the Middle East, dampened risk appetite and bolstered the greenback’s appeal as the leading reserve currency.
Meanwhile, the Wall Street Journal reported this week the United Arab Emirates was advocating for military action to reopen the Strait of Hormuz and was pressing for a UN Security Council resolution to authorize such an operation.
The prospect of supply disruption led to a sharp rise in Crude Oil prices, fueling inflation concerns and reinforcing the case for tighter monetary policy.
Traders are no longer expecting two rate cuts by the Federal Reserve this year. Instead, expectations of a potential rate hike have risen, which may keep the US Dollar underpinned and weigh on Gold.
Higher interest rates tend to increase the opportunity cost of holding Gold, which pays no interest.
Spot Gold was last down 2.80% on the day to trade at $4,625.08 per troy ounce.
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