WASHINGTON (dpa-AFX) - Gold prices have tumbled on Thursday as the Middle East crisis deepens after Iran-backed Houthi militants of Yemen attacked two Saudi Arabian vessels in the Red Sea, raising concerns of intense oil supply disruption for an extended period. The possibility of an interest rate hike by the U.S. Federal Reserve also weighed on gold prices.
Front Month Comex Gold for August month delivery has slumped by $101.60 (or 2.45%) to $4,050.30 per troy ounce.
Front Month Comex Silver for August month delivery has plunged by $2.335 (or 3.89%) to $57.760 per troy ounce.
In the ongoing Middle East conflict between the U.S. and Iran, U.S. forces completed their 12th consecutive night of strikes on Iran.
Meanwhile, compounding the escalation, Iran-backed Houthi group of Yemen struck two Saudi Arabian tankers, Encelia and Layla, in the Red Sea.
The oil and tanker trade in the Persian Gulf has already been disrupted by the Strait of Hormuz crisis.
After the June 17 Memorandum of Understanding signed between the U.S. and Iran collapsed following fresh attacks on each other, Iran announced the closure of the Strait of Hormuz.
Despite the U.S. military assuring safe escort for all vessels transiting the strait, shipowners refrained from carrying out any ship movements due to concerns of threats to lives and vessels.
As a result, crude oil prices have been skyrocketing, renewing inflationary concerns.
U.S. President Donald Trump threatened to destroy a power plant or bridge in Iran for every single strike by Iran on ships traveling across the Strait of Hormuz.
In response, Iran's Foreign Minister Abbas Araghchi stated that Iran's defense doctrine is 'an eye for an eye'. Retorting, U.S. Secretary of State Marco Rubio called the U.S. policy a 'head for an eye.' Rubio had earlier claimed that Iran was not serious about negotiations.
Iran's Parliamentary Speaker Mohammad Bagher Ghalibaf warned that Iran would not let any gulf nation sell its oil if Iran is not allowed to sell its crude.
Trump announced through Truth Social that the U.S. will hold Iran responsible and subject it to a major military punishment if the Houthis strike back again.
Crude oil prices have soared more than 5% today. As higher energy costs could keep inflation elevated, the sharp jump has fueled predictions that major global central banks could hike interest rates.
According to the CME Group's FedWatch Tool, investors are currently betting on a 35.80% chance of a quarter-basis-point interest rate-hike at the upcoming meeting of the U.S. Federal Reserve on July 28-29, while the odds on rates being held at the current level stand at 64.20%.
Higher inflation lowers the chances of any reduction in interest rates, thereby diminishing the appeal for non-yielding assets like gold.
Silver prices plunged as traders booked profits following the gains from four consecutive sessions.
On the economic front, data released by the U.S. Department of Labor today revealed that the unemployment claims sank by 22,000 to 187,000 for the week to July 18, well under expectations of an increase to 212,000.
Investors are now looking forward to the S&P Global Flash Purchasing Managers' Index and next week's Federal Open Market Committee decision to comprehend the trajectory of the U.S. economy in the coming weeks.
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