Gold slips on increased US-Iran tensions

Gold sank more than 1% on Wednesday, hitting an 11-week low, as the dollar and oil prices increased on the renewed hostilities between the United States and Iran, raising concerns about inflation and interest rate hikes.

Spot gold fell 1.8% to $4,187.59 an ounce by 0230 GMT, the lowest since March 23. U.S. gold futures fell 1.7% to $4,213.40 in August.

The dollar increased, making dollar-priced bullion more expensive for holders of other currencies. Oil prices climbed 1%, increasing worries about inflation and solidifying expectations that interest rates would stay higher for longer.The driver is actually the shift in Fed policy expectations, the rise in rates, and the rise in the currency. “I think all of those things are hanging over gold,” said Tastylive’s head of global macro Ilya Spivak.

The United States struck Iran on Tuesday after President Donald Trump said Tehran had downed a U.S. Apache helicopter in the Strait of Hormuz, increasing uncertainties over a prospective peace accord and further straining a fragile truce.

The CME FedWatch tool showed traders were pricing in more than a 70% possibility of a Federal Reserve interest rate hike by December. fedwatch .

Gold is viewed as a hedge against inflation but rising interest rates tend to impact on the non-yielding metal.

Markets are eyeing important U.S. inflation reports this week, with May Consumer ​Price Index data due later in the day and the Producer ​Price Index ⁠ reading on Thursday, to help evaluate the Fed’s monetary policy stance.“If we can get through $4,100, I think the path of resistance fundamentally changes for gold and we may be starting to look at $3,500 as the next level into the end of the year,” Spivak said.

Spot silver declined 1.5 percent to $64.43 an ounce, platinum dropped 2.8 percent to $1,678.10 and palladium slid 0.8 percent to $1,212.31.