Gold Prices Remain Stable Amid Weakened Hopes for Middle East Peace

Gold Steady as Tensions Rise in Strait of Hormuz

Gold prices remained steady at around $4,700 an ounce on Thursday as optimism over a deal to reopen the Strait of Hormuz faded following reports of attacks on US Navy vessels. The US military struck targets in Iran after the country fired on three navy destroyers sailing in the strait, escalating tensions and casting doubts on the likelihood of a deal that had earlier buoyed markets.

The latest clashes have heightened tensions as the US tries to exit a war now in its third month, while waiting for Iran to respond to its proposal to reopen the strait, a vital waterway for energy flows. As a result, gold has fallen around 11% since the conflict erupted, with the near-closing of Hormuz and resulting energy price shock fanning concerns about rising inflation that would keep interest rates higher for longer.

Higher interest rates and a stronger US currency are negative for bullion, as gold pays no interest and is priced in the greenback. Traders will be tracking the change in US non-farm payrolls set to be released later on Friday for clues on the trajectory of rates. Some Federal Reserve officials have played down the prospect of the central bank returning to monetary easing, as the statement after last week's monetary policy meeting suggested, given the war is clouding the economic outlook and creating uncertainties.

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The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.1% higher, but down 0.2% this week.