Gold holds losses as bond sell-off, Hormuz limbo weigh on outlook
This snapped a two-day rise as a bond rout lifted yields and the US dollar – twin headwinds for the precious metal
Gold experienced a setback on Wednesday after a bond sell-off and ongoing uncertainty in the Strait of Hormuz dampened its outlook. The precious metal had previously risen for two consecutive days before the recent decline. The bond rout led to higher yields and a stronger US dollar, which are generally unfavorable for gold, as it does not generate income.
On Tuesday, the yield on 30-year US Treasuries reached its highest level in nearly two decades. Furthermore, the future reopening of Hormuz, a vital shipping route handling a fifth of the world's oil and liquefied natural gas, remains uncertain. US President Donald Trump stated on Tuesday that there were no ongoing negotiations with Iran, leaving the control of the strait unresolved.
The June memorandum of understanding between the two countries has expired without any plans to extend it. To complicate matters further, the United Arab Emirates severed trade relations with Iran following an Iranian missile attack on its territory – the first confirmed strike on the Gulf nation since May. Investors will receive further updates on the US Federal Reserve's potential rate changes on Wednesday, with the release of the minutes from the July policy meeting and Chairman Kevin Warsh's address at the Fed's annual Jackson Hole symposium.
Despite the recent drop, gold was still trading around US$4,330 an ounce, slightly down 0.1 percent from its previous session. Silver, platinum, and palladium also declined in value.
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