WASHINGTON (dpa-AFX) - Gold prices have edged lower on Wednesday as rising concerns of a possible long drawn out war in the gulf continued to fuel concerns of high interest rates in the U.S. while softer U.S. producer price data limited the fall.
Front Month Comex Gold for August month delivery has moved lower by $27.20 (or 0.67%) to $4,042.50 per troy ounce.
Front Month Comex Silver for August month delivery has plunged by $1.803 (or 3.06%) to $57.095 per troy ounce.
A recent attack by Iran on a Cyprus-flagged vessel transiting the Strait of Hormuz, which prompted the crew to abandon the ship and escape through lifeboats, resulted in heavy military retaliation by U.S. forces on Iran.
Iran responded by targeting U.S. bases in the neighboring gulf countries and closed the Strait of Hormuz.
On June 17, both nations agreed to halt attacks for 60 days and utilize the period to find ways to charter a framework for discussions aimed at ending the war, which began on February 28.
Following the Memorandum of Understanding, Iran reopened the Strait of Hormuz, which it had shut at the beginning of the war.
After this weekend's flare-up, Iran closed the Strait of Hormuz again and U.S. President Donald Trump enforced a naval blockade on all ships entering or exiting Iranian ports.
U.S. Central Command announced it will ensure the safety of all ships travelling through the region.
Trump withdrew his earlier plans to collect a fee from vessels for the costs associated with the U.S. escort.
Yesterday, Trump suggested striking Iran's Pickaxe Mountain, an underground nuclear site.
Trump warned that the U.S. military campaign may get really bad next week if Iran refuses to strike a deal with the U.S. over its nuclear program and threatened to target bridges and power plants.
The IRGC issued a counter-threat stating it will halt all energy exports from the Middle East.
Axios reported that Trump discussed the next phase with officials in the White House Situation Room.
Today, the U.S. military concluded a fresh round of airstrikes during daylight hours.
Iran's Islamic Revolutionary Guard Corps stated that it attacked assets in Bahrain, Kuwait, and Jordan and claimed heavy damage on the U.S. Fifth Fleet headquarters.
Weeks before, reports surfaced indicating that Trump preferred to give diplomacy a full chance before considering any military option to end the crisis.
With both nations now unyielding for a compromise, investors are concerned that the ongoing escalation could escalate still further.
In the U.S. today, the month-on-month producer prices declined 0.30% in June following a downwardly revised 0.60% rise in May and on an year-on-year basis, it increased 5.50% for the same month, according to Bureau of Labor Statistics.
On a month-on-month basis, the core producer prices rose by 0.20% from the previous month and on an year-on-year basis, prices increased 4.70% in June, according to the U.S. Department of Labor.
The Producer Prices Index decreased to 156.57 in June from 157.00 in May.
The Mortgage Bankers Association of America revealed that the Purchase Index in the U.S. decreased to 157.20 on July 10 from 169.50 of the previous week.
Yesterday, the Labor Department said its Consumer Price Index increased by 3.50% in the 12 months through June after surging 4.20% in May. The core CPI inflation remained unchanged on a month-on-month basis, after gaining 0.20% in May.
Commenting on the soft numbers, U.S. Federal Reserve Chair Kevin Warsh observed that he would not cherry-pick the moment as a sign of progress.
Traders have reduced their bets on a Fed rate hike at its month-end meeting.
Currently, investors are betting on only a 10.20% chance of a quarter-basis-point interest rate-hike in the upcoming meeting of the U.S. Federal Reserve on July 28-29 while the bets on rates being held at the current level stand at 89.80%, according to the CME Group's FedWatch Tool.
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