WASHINGTON (dpa-AFX) - Reversing the losses from yesterday's slump, gold prices have surged on Wednesday, with expectations of a near-term rate hike by the U.S. Federal Reserve diminishing due to the intensifying Middle East crisis. As investors anticipate a hold on interest rates by the Fed, the U.S. dollar slid today, supporting the yellow metal.
Front Month Comex Gold for September month delivery has soared by $125.80 (or 2.88%) to $4,498.00 per troy ounce.
Front Month Comex Silver for September month delivery has also surged by $1.733 (or 2.71%) to $65.770 per troy ounce.
On Monday, the 60-day ceasefire period granted by the June 17 Memorandum of Understanding signed between the U.S. and Iran, expired.
In line with the MoU, both nations agreed to abandon attacks and seek peaceful ways to end their hostilities. However, within a few weeks, both sides commenced trading attacks, with the U.S. targeting Iranian military installations and Iran focusing its launches on the U.S. bases in its neighboring countries.
On Monday, U.S. President Donald Trump stated that the U.S. was not keen on renewing the ceasefire.
Yesterday, through Truth Social, Trump announced that the U.S. is not in any negotiations with Iran and asserted that there are none scheduled.
In addition, Trump claimed that the Strait of Hormuz is open and operative, free of all sea mines planted by Iran, and that the U.S. naval blockade on Iranian ports continues with full force and effect. U.S. Central Command is yet to endorse Trump's claims that the strait has been fully cleared of all Iran-laid sea mines.
Earlier, Trump posted a map of the Hormuz region which showed the crucial seaway marked as 'NEW U.S. Territory'.
Trump's new stance directly contradicted what he insisted days before in an interview with Fox News. Trump had remarked that the U.S. administration was engaged in direct backchannel negotiations with Iran's Islamic Revolutionary Guards Corps.
On Tuesday, through Fox News, Iranian military's spokesperson Ebrahim Zolfaghari warned that vessels trying to pass through the strait will find several holes in their hulls.
The U.K. Maritime Trade Operations agency announced that a cargo vessel transiting via the Strait of Hormuz came under a projectile attack.
Later, the United Arab Emirates detected two ballistic missiles launched by, Iran with the first one falling outside its territorial waters and the second falling within territorial waters.
After holding several rounds of talks with Oman, Iran was set to finalize a deal to manage the commercial shipping through the Strait of Hormuz.
Trump threatened to bomb Oman if it gets in the way of U.S. dealings with Iran.
As both nations refuse to climb down from their rigid stance, the Strait of Hormuz remains shut and consequently, crude oil prices surged due to supply disruption concerns.
Investors parsed the inflationary pressure arising from the re-surge in oil prices along with the recent U.S. economic data which showed a decline in job hiring and a moderate inflation.
Expectations of near-term interest hike by the Fed is now off investors' radar.
The U.S. dollar also came under pressure after the U.S. Treasury announced that it will at least double the size of its liquidity-support buyback operations for longer-dated Treasury securities.
From September 9, the Treasury will increase the maximum purchase from $2 billion to nearly $4 billion per operation.
With inflation expectations increasing and real yields declining, precious metals surged.
The U.S. dollar index was last seen trading at 98.90, down by 0.74 points (or 0.74%) today.
Currently, investors are betting on only a 36.60% chance of a 25-basis-point interest rate-hike at the upcoming meeting of the U.S. Federal Reserve on September 15-16, while the odds on rates being held at the current level stand at 63.40%, according to the CME Group's FedWatch Tool.
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