Gold gains momentum to near $4,400 as Fed hike expectations drop despite Us-Iran tensions

Gold prices surged to around $4,395 at the beginning of Asian trading on Monday. The increase came as disappointing US inflation data dampened predictions of a Federal Reserve (Fed) interest rate hike. The US Census Bureau reported that retail sales declined by 0.6% month-over-month in July, following a 0.2% rise in June. This figure fell short of expectations of 0.1% growth.

On an annual basis, retail sales increased by 5.0% in July, down from the previously reported 6.8% rate. The lower inflation expectations weighed on the US Dollar (USD), which in turn supported the price of gold, a USD-denominated commodity. The FedWatch tool indicated a 33.1% probability of a September Fed rate hike, but as interest rates remain low, holding non-yielding bullion becomes more attractive.

The Middle East tensions, however, could limit gold's upside potential. Iran's Deputy Foreign Minister called on the US to accept defeat and stop delusions after Trump suggested he would declare the Strait of Hormuz a "U.S. territory." Iran's Foreign Minister stated that there are no current negotiations between Tehran and Washington.

Analysts at Commerzbank see supportive factors for gold, as they expect the Fed not to raise interest rates, leaving room for further gold price appreciation. The metal's resistance level is around $4,480, while its support lies at the 100-day simple moving average ($4,385.85) and the Bollinger middle band around $4,195.