Gold Holds Gains as Dollar Weakens

Gold slipped below $4,100 an ounce on Friday, snapping a two-session winning streak, but remained on track for its first monthly gain in five months. The precious metal found support this week after the US Federal Reserve left interest rates unchanged despite mounting inflationary pressures stemming from renewed hostilities in the Middle East. However, expectations for tighter monetary policy continued to cap gains, with markets currently pricing in about a 63% chance of a Fed rate hike in September. Meanwhile, the US military launched fresh strikes on Iranian targets in retaliation for Tehran’s attacks on US assets across the Middle East, reducing the likelihood of any near-term diplomatic agreement. Gold has come under constant pressure since the US-Iran war erupted in late February, as surging oil prices fueled inflation concerns and strengthened expectations for tighter monetary policy.

Gold traded around $4,100 an ounce on Friday after rising for two straight sessions, supported by a sharp decline in the US dollar as Japan is suspected to have intervened in the currency market once again to strengthen the yen. The precious metal also drew support this week after the Federal Reserve left interest rates unchanged despite mounting inflationary pressures stemming from renewed hostilities in the Middle East. However, expectations for tighter monetary policy continued to limit further gains, with markets currently pricing in about a 63% chance of a Fed rate hike in September. Meanwhile, the US military launched fresh strikes on Iranian targets in retaliation for Tehran’s attacks on US assets across the Middle East, reducing the likelihood of any near-term diplomatic agreement. Gold is also on track to rise more than 2% this month, marking its first monthly gain in five months.

Gold climbed to $4,080 per ounce on Thursday, extending Wednesday's 2% rally as a weaker US dollar provided support, while investors assessed the Federal Reserve's decision to leave rates unchanged and monitored escalating tensions in the Middle East. The Fed kept rates at 3.50%-3.75%, with Chair Kevin Warsh reaffirming the central bank's commitment to bringing inflation down. Meanwhile, the US military said it struck dozens of IRGC targets in Iran after Tehran launched ballistic missiles at US troops in Jordan, raising concerns over renewed inflationary pressures. Although gold is widely viewed as a hedge against inflation and geopolitical uncertainty, expectations of higher interest rates for longer tend to weigh on the non-yielding metal. Markets are currently pricing in roughly a 60% chance of a Fed rate hike in September. Separately, the World Gold Council said unofficial gold inflows into India have risen since the country increased import tariffs earlier this year.