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Gold prices edged lower on July 24 after a 2 percent drop in the previous session, according to Reuters, as the surge in oil markets heightened worries about persistent inflation. Spot gold eased 0.1 percent to $4,042.77 per ounce by early trading, Reuters data showed, while U.S. gold futures for August delivery fell 0.1 percent to $4,045.60. The moves came after the metal dropped more than $120 from a two-week high reached on Wednesday, market figures indicated. Brent crude’s advance above the $100 threshold added pressure on non-yielding assets like bullion by boosting the appeal of higher interest rates.
A Reuters assessment found that rising crude prices have strengthened the case for tighter U.S. monetary policy, with traders now pricing in a greater likelihood of Federal Reserve rate hikes to combat inflation. Higher fuel costs could keep inflationary pressures elevated, prompting central banks to maintain rates at higher levels for longer, according to analysts cited in the report. This dynamic weighed on gold’s attractiveness as a hedge, the assessment noted. Trading Economics data placed gold around $4,031.52 per ounce on the day, reflecting a 0.45 percent decline from the prior close.
The oil rally stems from escalating tensions in the Middle East, where the Iran conflict has disrupted roughly 20 percent of global supply for an extended period, Rapidan Energy Group reported in March. Brent crude settled above $100 a barrel for the first time since August 2022 as millions of barrels remained trapped in the Persian Gulf, Bloomberg figures showed. U.S. crude futures also pushed past the $100 mark in subsequent months amid attacks that widened the conflict, Reuters reported. These supply shocks have sustained elevated energy prices into the summer months.
Gold has risen 20.79 percent compared with the same period last year despite the latest softening, according to Trading Economics data, after hitting an all-time high of $5,608.35 per ounce in January. A JPMorgan Global Research assessment found that prices are expected to average $6,000 per ounce by the final quarter of this year, with potential to reach $6,300 in 2027 amid ongoing geopolitical risks and central bank buying. The mid-year outlook from the World Gold Council indicated that gold’s performance remains aligned with moderate global growth and still-elevated inflation, even as oil fluctuations introduce new variables. Investor interest has shown some moderation recently, the JPMorgan report added.
Market participants continue to monitor developments in the Middle East for further impacts on both commodities, a Reuters dispatch stated. The U.S. has conducted strikes against Iran while the latter has threatened additional disruptions to energy exports, according to updates in the report. Such actions could sustain volatility in oil markets and indirectly influence gold’s trajectory through the inflation channel. Analysts at FXTM, quoted by Reuters, cautioned that escalating tensions resulting in higher oil prices expose gold to additional downside risks in the short term.
