WASHINGTON (dpa-AFX) - Gold prices have plunged on Thursday as concerns of energy-linked inflation leading to a high interest rate regime in the U.S. overrode gold's safe-haven status following a New York Times report that the U.S. and Israel are planning to conduct a short but intense military operation against Iran in November.
Front Month Comex Gold for December delivery has plummeted by $92.40 (or 2.23%) to $4,057.60 per troy ounce.
Front Month Comex Silver for December delivery has nosedived by $2.810 (or 4.87%) to $54.900 per troy ounce.
Yesterday, citing U.S. officials, the New York Times reported that the U.S. and Israel are preparing to renew strikes on Iran after the mid-term elections in the U.S. are over in the first week of November.
The operation could be brief but intense and may target Iran's energy infrastructure, nuclear facilities, and missile and drone arsenal. The report added that forces from both the nations have commenced practice strike maneuvers.
The report re-ignited concerns of a near-term interest rate hike in the U.S. due to the subsequent inflationary pressures.
Tempering the fears to some degree, at a rally in South Carolina yesterday, U.S. President Donald Trump stated that the U.S. could end its war with Iran but he stated that the U.S. prefers a lasting settlement rather than a temporary peace agreement.
The U.S.-Iran war that began late February is set to enter its eighth month.
A couple of days before, markets cheered reports claiming that Pakistan and Qatar presented a proposal to end the conflict to which both the nations have given their preliminary approval. However, the initial enthusiasm faded after conflicting reports from both the U.S. and Iran.
While Iranian leaders stated that talks cannot happen until Iran's conditions are met by the U.S, U.S. Secretary of State Marco Rubio stated that holding negotiations with the Iranian regime is tough.
Asserting authority over the Strait of Hormuz, Iran's Islamic Revolutionary Guards Corps threatened to extend the confrontation to U.S. bases if vessels continue to transit the strait without coordinating with Iran's military.
Following media reports that the Pentagon was planning to use the GBU-43/B, known as the 'Mother of All Bombs' against Iranian targets, yesterday, the IRGC announced that it would unveil a new weapon which it termed as the 'Father Of All Bombs' in response to the U.S. threats.
Rubio remarked that shipping traffic has improved over the past few days to more than 80% of the pre-war level.
Contrasting Rubio's claim, IRGC spokesperson Hossein Mohabi stated that the strait is not open and observed that a few vessels might have managed to slip through under the cover of darkness.
According to a different report by Reuters, the U.S. State Department had called for the ordered departure of some diplomats and their family members from Riyadh amid threats of intense strikes by the Iran-backed Houthi militants of Yemen on critical infrastructures in Saudi Arabia.
Crude oil rallied on the possibility of deeper escalation of dual conflicts in the Middle East that could strongly disrupt oil supplies for an indefinite period and push up energy costs. Consequent inflation concerns overshadowed gold's safe-haven status.
The U.S. Federal Reserve is set to announce its interest rate decision on October 28. Odds for the Fed to maintain rates at the current level linger near 95%, according to CME Group's FedWatch Tool.
On the economic front, data from the U.S. Labor Department showed that for the week ending October 17, initial claims for unemployment benefits declined by 6,000 to 194,000, below market expectations of 200,000 and down from a revised 200,000 in the previous week. The numbers indicate that employers are still holding on their workers.
However, the continuing jobless claims increased to 1,728,000 for the week ending October 10 from 1,703,000 in the previous period, hinting that workers are finding it difficult to find another job.
Overall, the data does not show any sharp deterioration in the employment sector.
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