ia8e9)u4wg1r7}cn37a6t9xt_media_dl_1.png Bloomberg

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(Bloomberg) — Gold held a decline as a second day of US strikes against Iran drove energy prices higher and intensified concerns around inflation.

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Bullion was little changed near $4,080 an ounce, after falling for three straight days. The latest attacks — which US Central Command said were to degrade Iran’s ability to disrupt shipping in the Strait of Hormuz — came hours after President Donald Trump said he thought a ceasefire was “over.” Tehran has threatened a large-scale retaliatory operation against US bases in the Middle East.

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Oil prices surged, with Washington also having revoked a waiver that had allowed Iran to sell crude globally. 

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For gold traders, the escalation of fighting in the Middle East raises concerns that the Federal Reserve may need to keep interest rates higher for longer to combat stubborn inflation. Minutes of the Fed’s June meeting released Wednesday showed a few policymakers saw a case for an increase, though they ultimately backed the decision to keep them steady.

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More generally, the minutes reflected growing concern among US central bank officials over inflation, just as worries about the labor market receded slightly. Higher borrowing costs are typically a headwind for gold, which doesn’t pay interest.

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A muted start to gold trading on Thursday “feels more like hesitation before a new storm than genuine calm,” said Hebe Chen, an analyst at Vantage Markets in Melbourne. “The market has heard the Middle East alarm bell, but it is not yet trading it as a full-blown crisis.”

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Gold is down by more than a fifth since the Iran war started in late February, with a wave of profit-taking bringing a three-year bull run to an end, and recently pushing the metal below $4,000. There’s little evidence yet, however, that investors are putting on large-scale short positions in anticipation of further declines.

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“Traders are watching whether the risk shifts from a headline shock into the start of a new geopolitical tension cycle, and how severe the ripple effects could be,” Chen said. “Until that confirmation arrives, gold may stay in a holding pattern.”

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Spot gold was down 0.1% at $4,073.48 an ounce at 7:48 a.m. in Singapore. Silver rose 0.2% to $58.39 an ounce. Platinum and palladium edged higher, while the Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed after ending the previous session marginally lower.

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