Gold and Oil Markets Between Fed Warnings and Rising Geopolitical Tensions

Amid ongoing economic and political developments, gold and oil markets are experiencing notable fluctuations,
swinging between the pressure of U.S. monetary policies and escalating geopolitical tensions in the Middle East.

Contents

The Federal Reserve
Gold
Oil
Strait of Hormuz

The Federal Reserve

Fed Warnings Push Gold Slightly Higher
Gold prices saw a slight increase during early Asian trading, with bullion trading near $3,380 per ounce,
after a 0.6% decline in the previous session.
This volatility followed comments from Federal Reserve Chairman Jerome Powell,
who warned that inflation risks continue to threaten the U.S. economy.

Despite the Fed keeping interest rates unchanged and policymakers maintaining their projection of two rate cuts before year-end,
the new economic forecasts painted a rather pessimistic picture,
with expectations of slower growth, higher inflation, and weaker employment.
These factors could negatively impact gold’s appeal as a non-yielding asset, potentially limiting its future gains.

Gold

Geopolitical Tensions Continue to Drive Gold Demand
On the other hand, gold continues to enjoy strong support due to escalating geopolitical tensions,
especially in the Middle East. U.S. President Donald Trump stated that Iran missed the chance to reach a nuclear deal,
without clarifying whether Washington would join Israel’s military actions.

This heightened tension, coupled with global economic uncertainty,
has increased demand for gold as a safe-haven asset.
Heavy buying by central banks and investor inflows into exchange-traded funds have driven gold prices up
by nearly 30% since the beginning of the year. Spot gold rose 0.3% to $3,378.59 per ounce early Thursday morning in Singapore.

Oil

Oil Prices Fall Amid Anticipation of U.S. Decision on Iran
Conversely, oil prices fell after a week of volatile trading, as markets focused on whether President Trump would
involve the U.S. in the military conflict between Israel and Iran.
Brent crude declined toward $76 per barrel, while West Texas Intermediate traded around $75.

Fueling the volatility were shifts in trading options and widening price spreads,
as Trump held a meeting with top advisers to discuss the situation without announcing a final decision.
When asked about the possibility of striking Iran,
he stated, “Maybe I will, maybe I won’t,” heightening market anticipation and anxiety.

Strait of Hormuz

Strait of Hormuz: The Key Concern for Energy Markets
The Strait of Hormuz remains the primary chokepoint in global oil markets, with about one-fifth of global oil production passing through it.
Although there are currently no indications that Iran intends to disrupt shipping in this vital corridor,
markets remain on edge, especially in light of U.S. warnings about potential developments.

A report by Goldman Sachs estimated a geopolitical risk premium of around $10 per barrel added to Brent prices.
However, the bank’s base-case scenario assumes oil prices will return to $60 per barrel in Q4—assuming no real supply disruption.

Meanwhile, U.S. crude inventories saw a sharp drop of 11.5 million barrels last week—the largest drawdown in nearly a year—reflecting significant shifts in supply and demand dynamics.

Conclusion

Current indicators suggest that global markets—particularly gold and oil—will remain heavily influenced by developments in U.S. monetary policy and the unfolding geopolitical landscape.
Investors continue to monitor every shift closely,
awaiting any changes that may reshape the global economic outlook in the months ahead.

Gold and Oil Markets Between Fed Warnings and Rising Geopolitical Tensions

Gold and Oil Markets Between Fed Warnings

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