FX.co ★ Gold Holds Losses as Oil Prices Rise

Gold steadied around $4,350 an ounce on Wednesday after two consecutive sessions of declines, weighed down by rising oil prices that stoked inflation worries and reinforced expectations of further interest rate hikes. Oil extended its climb after US forces destroyed five Iranian crude tankers near Kharg Island—Tehran’s main oil export hub—in retaliation for attempted missile attacks on a US warship.

Investors are also focused on key US inflation data due this week, looking for clearer signals on the Federal Reserve’s next policy steps. Futures markets now imply roughly a 60% probability of a 25-basis-point rate increase next week. While gold is widely viewed as an inflation hedge, higher interest rates tend to curb demand for the non-yielding metal by making interest-bearing assets more attractive.

Despite the latest pullback, gold logged strong gains in August, underpinned by robust investment and hedging demand, as well as continued central bank buying—most notably from China.