WASHINGTON (dpa-AFX) - Gold prices have slumped on Friday amid rising inflation worries due to a surge in crude oil prices for the second day due to the potential chances of re-escalation in the U.S.-Iran conflict after the midterm elections in the U.S. in November. Concerns of a possible higher interest rate regime in the U.S. have increased among investors.
Front Month Comex Gold for December delivery has tumbled by $52.30 (or 1.29%) to $4,008.10 per troy ounce.
Front Month Comex Silver for December delivery has also slumped by $1.017 (or 1.85%) to $53.990 per troy ounce.
Yesterday, asserting its claim over the crucial Strait of Hormuz, Iran's Islamic Revolutionary Guards Corps announced that four vessels were targeted while transferring oil and caught fire while three were disabled after they struck sea mines laid by the Iranian military. The U.S., however, dismissed these claims.
A day earlier, the IRGC claimed that two tankers attempting to transit by violating Iran's shipping protocol were set ablaze after they struck mines.
Yesterday, the New York Times reported that the U.S. and Israel are preparing to strike Iranian targets through a short but intense military campaign after the November midterm elections in the U.S. The NYT report also noted that talks with Iran are ongoing.
Speaking about Iran, U.S. President Donald Trump stated that the U.S. forces can exit from the Middle East even now but reiterated that the U.S. wants a long-lasting solution to the crisis and not a temporary peace deal. Trump reasserted that the war has weakened Iran militarily and financially.
Fears of a prolonged disruption to crude oil flows out of the Arabian gulf pushed oil prices higher.
While the U.S. claimed shipping traffic across the Strait of Hormuz is returning to normalcy, Iran's IRGC asserted that the strait remains closed for ships.
Against the backdrop of attacks on civilian and energy infrastructure in Saudi Arabia by Iran-backed Houthi militants of Yemen and threats of further attacks, U.S. diplomats and their families have been instructed to exit the gulf and return to the U.S.
Saudi Arabia's Aramco ordered the evacuation of its headquarters in Dhahran in the gulf near Bahrain.
In an interview with the Financial Times, U.S. Ambassador to the United Nations Mike Waltz stated that the war with Iran could last one more year but speculated that the Iranian regime could come to the negotiating table before that.
On top of the geopolitical risk factor, war-risk insurance premiums and other actions to ensure safe passage of commercial ships that carry oil and energy cargo have added to crude oil costs.
The U.S. Federal Reserve is set to announce its decision on interest rates at the end of its two-day meeting on October 27-28.
Currently, investors are betting on a 10.5% chance of a 25-basis-point interest rate-hike while, the odds on rates being held at the current level stand at 89.5%, according to the CME Group's FedWatch Tool.
The U.S. Dollar Index was last seen trading at 101.82, up by 0.22 (or 0.22%).
While the chances of an intense military confrontation offer support to gold prices, rising crude oil prices tend to prolong inflation and could pressure the Fed to tighten its monetary policy. A higher interest rate environment acts against non-yielding gold, making it costlier for overseas buyers.
Analysts are waiting to watch how events unfold in the coming days.
On the economic front, data released by S&P Global revealed that the composite Purchasing Managers Index in the U.S. decreased to 57.60 in October from 58.40 in September.
While the manufacturing PMI edged up to 56.00 in October from 55.90 in September, services PMI edged down to 57.9 in October 2026 from 58.8 in September.
The University of Michigan's consumer sentiment index was revised higher to 48.0 in October, up from a preliminary estimate of 46.3 but remained at its lowest level in five months.
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