PrintPRECIOUS-Gold falls as war-driven inflation fears fuel rate-hike bets
BY Reuters | ECONOMIC | 11:56 AM EDT* Brent crude oil rose more than 4%
* US Personal Consumption Expenditures data due on Thursday
* UBS lowers year-end gold price target (Updates for US mid-session trading)
By Anjana Anil
May 26 (Reuters) - Gold fell more than 1% on Tuesday, pressured by bets of higher U.S. interest rates this yearas renewed U.S. military strikes on Iran dampened hopes for a peace deal, pushed up oil prices and revived inflation concerns. Spot gold was down 1.3% at $4,511.23 per ounce as of 11:05 a.m. EDT (1505 GMT). U.S. gold futures for June delivery fell 0.2% to $4,513.90.
"The bond markets are thinking that the next rate move by the Federal Reserve is going to be an increase. That's a negative for the gold market here today," said Jim Wyckoff, market analyst at American Gold Exchange.
Kevin Warsh was sworn in as Federal Reserve chief on Friday amid mounting expectations that the central bank would move to tighten monetary policy. Markets currently expect a 25-basis-point Fed rate hike in December. Despite being an inflation hedge, non-yielding bullion struggles in a high-rate environment. Brent crude rose more than 4% as uncertainty prevailed over whether the U.S. and Iran would reach a deal and when shipping flows through the Strait of Hormuz would resume.
A rise in crude prices feeds into inflation as manufacturers pass on higher costs to consumers. "Near-term technicals still favor the bears, so that's prompting some technical selling as well," Wyckoff said, adding that the release of the U.S. Personal Consumption Expenditures Price Index on Thursday will be closely monitored by the market to gauge inflation pressures and the Fed's future monetary policy path.
Meanwhile, UBS lowered its year-end gold price target by $400 to $5,500 due to persistent risks from higher yields and a stronger dollar.
Spot silver fell 2.3% to $76.27 per ounce, platinum lost 1.3% to $1,942.56, and palladium shed 1.3% to $1,379.54. (Reporting by Anjana Anil in Bengaluru; Editing by Paul Simao and Diti Pujara)
