Gold declines as Trump scraps Iran memorandum, markets await Fed minutes

LONDON (July 8) Gold (XAU/USD) trades around $4,050 on Wednesday, down 1.40% on the day at the time of writing, as investors favor the US Dollar (USD) following a fresh deterioration in tensions between the United States (US) and Iran. The precious metal remains under pressure despite the increasingly fragile geopolitical backdrop, as markets expect that persistently higher energy prices could keep US monetary policy restrictive.

Market sentiment deteriorated after US President Donald Trump said that the memorandum of understanding aimed at ending the conflict with Iran was now "over." Trump also stated that he no longer wanted to deal with Iran, while announcing trade measures against Spain and renewing his criticism of the North Atlantic Treaty Organization (NATO). These remarks supported the US Dollar, while Oil prices advanced amid rising concerns over global supply disruptions.

Tensions escalated after US strikes targeted Iranian military infrastructure in response to attacks on commercial vessels transiting the Strait of Hormuz. The collapse of the memorandum with Iran has reignited concerns over the security of this strategic waterway, through which a significant share of global Oil exports passes. Market participants fear that a broader conflict could keep energy prices elevated and fuel a new wave of inflationary pressures.

Against this backdrop, US Treasury yields remain elevated and continue to weigh on non-yielding Gold. Investors are now focused on Wednesday’s release of the Federal Reserve (Fed) June meeting Minutes for additional guidance on the future path of monetary policy.

FXStreet