Gold Wavers as US-Iran Strikes Lift Oil, Markets Await Fed Minutes

International gold prices swung between gains and losses on Wednesday (July 8) as investors weighed escalating Middle East tensions after the US launched fresh strikes on Iran, while awaiting the release of the Fed’s June meeting minutes. Spot gold was last at $4,125.59/oz, up 0.5% on the day.^[CNBC] In the prior session (Tuesday), gold retreated as the market digested geopolitical risk and rate expectations, falling 0.6% to $4,138.32/oz from a two-week high.^[CNBC]

Strait of Hormuz Conflict: Oil Surges, Reigniting Inflation Fears

US Central Command said American forces launched a “series of powerful strikes” on Iran late Tuesday in retaliation for Iranian attacks on three commercial vessels transiting the Strait of Hormuz.^[CNBC] The strikes came after the US Treasury revoked a license allowing Iran to sell oil globally.^[CNBC] According to Kitco, three tankers were attacked in or near the Strait of Hormuz within 24 hours, including a Qatari LNG tanker that caught fire.^[Kitco]

Oil prices surged in response. WTI crude for August delivery rose 2.1% in Asian trading to $71.87/bbl; Brent crude for September gained 1.9% to $75.53/bbl.^[CNBC] In Tuesday’s session, WTI and Brent had already risen about 1.5% and 1.6%, respectively.^[Kitco]

Kitco analysts noted that geopolitical fear is no longer flowing directly into gold. Instead, it first hits crude oil, then feeds into inflation expectations, and ultimately influences Fed policy — by the time it reaches gold, the tailwind has turned into a headwind.^[Kitco] Rising oil prices keep inflation concerns alive, and under the current monetary policy regime, persistent inflation pressure translates directly into higher rates — a cost borne by gold as a non-yielding asset.

Fed Minutes in Focus: Warsh’s Hawkish Wild Card

Market attention is turning to the June FOMC meeting minutes, due at 2:00 PM ET Wednesday. This was the first policy meeting chaired by new Fed Chair Kevin Warsh, where officials held rates steady but signaled that further hikes might be needed if inflation pressures persist.^[CNBC]

“The FOMC minutes will be a wild card because Warsh was very opaque in his recent press conference,” said Adam Crisafulli, founder of Vital Knowledge, in a note. “Typically, [Jerome] Powell would provide a fairly comprehensive readout of the meeting’s discussion, but Warsh did not. So the minutes — likely hawkish in tone — could contain some surprises.”^[CNBC]

“The reality is the Fed remains very focused on controlling inflation — so ‘higher for longer’ still seems the most likely path,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.^[Kitco]

Traders are currently pricing in a 60% probability of a September rate hike, per the CME FedWatch tool.^[Kitco] Last Friday’s US June nonfarm payrolls report — showing just 57,000 new jobs added, well below the 115,000 expected — briefly led traders to dial back near-term rate hike bets, but that relief proved short-lived.^[Kitco]

Market Reaction: US Futures Flat, Asian Markets Under Pressure

US stock index futures were little changed late Tuesday amid Middle East tensions and rising oil prices. Dow Jones Industrial Average futures fell 29 points, while S&P 500 and Nasdaq 100 futures each dipped about 0.1%.^[CNBC]

In Tuesday’s regular session, a rotation out of AI-related stocks and rising oil prices weighed on sentiment. The Dow fell over 100 points after hitting an intraday high; the S&P 500 lost 0.5%; and the Nasdaq Composite dropped 1.2%, led lower by chip stocks.^[CNBC]

Asian markets were broadly lower on Wednesday as escalating Middle East tensions dampened investor sentiment. Japan’s Nikkei 225 fell 0.55%, South Korea’s Kospi dropped 0.72%, and Australia’s S&P/ASX 200 lost 1.36%.^[CNBC]

Structural Support: Central Bank Buying and Hong Kong’s New Infrastructure

Despite near-term headwinds for gold, structural support remains in place. Kitco noted that the People’s Bank of China has added to its gold reserves for the 20th consecutive month, holding 75.44 million troy ounces as of end-June, up from 74.96 million a month earlier.^[Kitco]

Separately, Hong Kong launched a central gold clearing system on Tuesday and simultaneously resumed gold futures trading, aiming to position itself as a regional gold reserve hub.^[Kitco] Such infrastructure developments typically accompany lasting shifts in gold holdings.

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