Gold prices fell in Wednesday's trading session as tensions in the Middle East escalated again, pushing oil prices up and stalling negotiations between the US and Iran. Meanwhile, investors are waiting for a series of important US economic data to assess the monetary policy outlook of the US Federal Reserve (Fed).
Spot gold prices fell 0.95% to 4,448.29 USD/ounce at 4:15 PM Vietnam time, after rising more than 1% in the previous session. US gold futures for August delivery also fell 0.7% to 4,488.90 USD/ounce.
The conflict situation in the Gulf region continues to heat up as the US military said that Iran's missile attacks on Bahrain, Kuwait and some other targets in the region have been intercepted or failed.
US Secretary of State Marco Rubio said that US President Donald Trump's negotiating group has never proposed easing sanctions in exchange for Iran reopening the Strait of Hormuz.
Mr. Rubio emphasized that any easing of sanctions can only be considered if Tehran abandons its nuclear program.
Mr. Kelvin Wong - senior market analyst at OANDA - commented: "The market is starting to consider the possibility that the ceasefire with Iran may not be maintained, even though Mr. Trump is still pushing for a peace agreement.
He believes that if tensions continue to escalate, it could weaken any recovery efforts of gold prices in the short term.
Oil prices increasing by more than 1% in the session have increased concerns about inflationary pressure as well as the possibility of interest rates continuing to remain high.
Ms. Beth Hammack - President of the Federal Reserve Bank of Cleveland - said that the Fed may have to raise interest rates soon if already high inflationary pressure continues to increase.
Investors are currently focusing on the US non-farm payroll report to be released on the same day, along with the official payroll report expected to be released on Friday, in order to find more signals about the Fed's monetary policy roadmap.
Although gold is often seen as an inflation hedging tool, this precious metal tends to lose its appeal in a high-interest rate environment because it does not yield yields.
In other precious metals markets, spot silver prices fell 1.1% to 74.27 USD/ounce. Platinum fell 0.5% to $1,928 an ounce, while palladium lost 0.6% to $1,361.75 an ounce.
