FX.co ★ Gold Nears Two-Week Low as Fed Hike Bets Rise

Gold hovered near $4,440 an ounce on Monday, close to a two-week low, as renewed tensions in the Middle East stoked inflation fears and reinforced expectations of a September interest rate hike following hawkish comments from Federal Reserve Chair Kevin Warsh. The metal slumped more than 3% on Friday, its steepest one-day decline since June 10, after Warsh cautioned that the Fed would “have work to do” unless there is clearer evidence that inflation is on track to return to its 2% target. According to the CME FedWatch Tool, markets are now pricing in just over a 60% probability of a September hike, up from about 36% before his remarks. Oil prices also surged after the United States said it struck an Iranian island in the Strait of Hormuz, drawing a response from Tehran. Even with the recent pullback, gold is still up roughly 10% for the month—its strongest monthly performance since January—supported by the US Treasury’s announcement that it will double liquidity-support buybacks of longer-dated bonds, a move that has heightened concerns over potential currency debasement.