World gold prices continued to face pressure in the session of July 14 as investors assessed the impact of tensions in the Middle East and the monetary policy outlook of the US Federal Reserve (Fed).
As of 10:54 am Vietnam time, spot gold prices fell 1.72% to 4,017.91 USD/ounce. Meanwhile, August gold futures contracts increased slightly by 0.42% to 4,022.40 USD/ounce. The decline occurred in the context of the market strongly raising expectations that the Fed will continue to raise interest rates.
The decline took place in the context of the market strongly raising expectations that the Fed will continue to raise interest rates. After Fed Governor Christopher Waller's statement about the possibility of raising interest rates if inflationary pressure continues to extend, the options market currently reflects about 50% of the Fed's ability to raise interest rates in the July meeting. At the same time, the market also valued about 68% of the Fed's ability to continue raising interest rates at the September meeting.
Pressure on the gold market also comes from the sharp increase in energy prices after new developments in the Middle East. Transportation through the Strait of Hormuz decreased, while WTI oil prices rose to about 72.9 USD/barrel and Brent oil to nearly 79.6 USD/barrel, increasing concerns about inflationary pressure.
Rising oil prices have supported the USD and pushed US government bond yields up. At the beginning of the session on July 14, US 10-year term bond yields rose to about 4.58%, while 2-year term yields exceeded 4.20%. The high yield environment continues to reduce the attractiveness of gold - an asset that does not yield yields.
Previously, the US June jobs report showed that the economy created 57,000 jobs, the unemployment rate remained at 4.2%, while the jobs data for April and May was adjusted down a total of 74,000. Initially, these figures reduced expectations that the Fed would continue to tighten monetary policy. However, the minutes of the Fed's June meeting later brought inflation risk back to the focus, causing expectations of raising interest rates to increase.
This week, the focus of the market will be the US Consumer Price Index (CPI) for June and the first hearing before Congress by Fed Chairman Kevin Warsh. The results of these two events are expected to significantly impact the Fed's interest rate expectations, thereby affecting the developments of gold prices in the short term.
