July 10 (Reuters) – Gold edged lower on Friday and was set for a weekly loss, as rising crude oil prices and escalating U.S.-Iran tensions fed concerns that the Federal Reserve may keep monetary policy tight for longer.
Spot gold fell 0.4% to $4,105.97 per ounce by 1106 GMT, leaving it down about 1.6% for the week. U.S. gold futures for August delivery slipped 0.6% to $4,114.80 per ounce.
“Spot prices may once again test the $4,000 per-ounce level for psychological support should tensions escalate further and oil prices extend their rebound,” said Han Tan, chief market analyst at Bybit.
Oil was headed for a weekly gain after Iranian forces launched strikes against U.S. military infrastructure in Gulf states on Thursday, a day after Washington targeted Iran’s southern coastal and eastern regions.
Higher energy prices can lift inflation, which may push central banks to raise interest rates. That tends to weigh on gold because the metal pays no yield.
Markets are pricing in a 58% chance of a September rate hike, according to CME’s FedWatch tool. FEDWATCH/
Investors are now watching U.S. inflation data due next week and testimony from Fed Chair Kevin Warsh.
“The U.S. CPI print may be the next big catalyst for spot gold, especially if Warsh sticks with his mantra of not giving much away by forward guidance,” Tan said, adding that a shift away from the Fed’s hawkish stance appears unlikely without a sustained moderation in U.S. inflation.
Minutes from the Fed’s June meeting showed growing concern about inflation, with some policymakers favouring a rate hike before rates were left unchanged.
Meanwhile, gold traded at a wide discount in India this week as price volatility weighed, while demand in China remained steady, with the central bank reporting its largest monthly increase in gold reserves in more than 2-1/2 years in June.
Among other metals, spot silver fell 1.1% to $59.34 per ounce, platinum gained 0.51% to $1,618.47 and palladium climbed 1.6% to $1,267.80. All three metals were on track for a weekly loss.
Reporting by Sumit Saha in Bengaluru; Editing by Subhranshu Sahu and Leroy Leo
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