Gold prices fell to around $3,975 during Friday’s early Asian trading session. The decline came after Iran reportedly urged the Houthis to block the Red Sea gateway if the US targeted its power network, intensifying Middle East tensions. The escalating geopolitical conflict strengthened expectations that the Federal Reserve could raise interest rates later this year, putting additional pressure on the precious metal.
Gold prices remained under pressure, slipping toward an eight-month low near $3,975 in early Asian trading on Friday. The precious metal continued to weaken as escalating tensions in the Middle East fueled inflation concerns and strengthened expectations that US interest rates could remain higher for longer.
According to Reuters, Iran has instructed Yemen’s Houthi movement to prepare to block the Red Sea shipping route if the United States targets Iranian power infrastructure. The warning followed US President Donald Trump’s threat earlier this week to strike Iran’s power network.
Any disruption to the Red Sea would significantly worsen the global energy crisis already intensified by Iran’s closure of the Strait of Hormuz. Such a scenario could drive crude oil prices even higher, increasing inflationary pressures and encouraging major central banks to keep monetary policy restrictive. Higher interest rates typically reduce the attractiveness of non-yielding assets such as gold.
The renewed geopolitical tensions have overshadowed recent signs of easing US inflation. Data released earlier this week showed that both the Consumer Price Index (CPI) and Producer Price Index (PPI) cooled in June, suggesting inflationary pressures had moderated.
Despite the softer inflation readings, market participants now see roughly a 55% probability that the Federal Reserve will raise interest rates at its September meeting, according to the CME FedWatch Tool, adding further downside pressure to gold.
THE ETERNAL SOVEREIGN 
Leave a comment