Gold Prices Rise as Hormuz Tensions Fuel Inflation Risks

Gold prices moved higher on Thursday, recovering from their lowest level since early August as renewed tensions around the Strait of Hormuz increased concerns over energy supplies and inflation. Expectations that the Federal Reserve could raise interest rates again this year continued to limit bullion's gains.

XAU/USD rose 0.6% to $4,134.19 an ounce by 21:36 ET (01:36 GMT), while U.S. gold futures gained 0.4% to $4,158.30. Silver climbed 1% to $60.37 an ounce, and platinum advanced 1.7% to $1,661.28. The U.S. Dollar Index was nearly unchanged at 102.23.

Geopolitical risks remained in focus as Tehran intensified attacks on tankers traveling through the Strait of Hormuz, a crucial route for global energy shipments. The White House is also weighing possible military strikes against Iranian targets ahead of the U.S. midterm elections in November.

Although Middle East oil flows have recovered close to pre-conflict levels, shipping costs have surged to record highs. Energy supply concerns were also heightened by a tropical storm in the Gulf of Mexico, where MMA reported that about 25% of oil production had been shut down.

The U.S.-Iran conflict has lasted more than seven months, with gold falling roughly 20% since fighting began in late February. Higher energy prices have fueled inflation concerns and encouraged tighter monetary policy, creating pressure on non-yielding assets such as gold.

Federal Reserve minutes added to expectations of further tightening. All 19 policymakers backed September's interest rate increase, while most indicated another hike could be appropriate before year-end.

Markets are pricing in about a 20% probability of an October rate hike and an 80% chance of an increase by December. Higher Treasury yields and a stronger U.S. dollar have also weighed on gold demand.

However, central bank purchases continue to support bullion. ANZ analysts said official-sector buying has helped cushion losses. The People's Bank of China added 740,000 ounces of gold to its reserves in September, extending its buying streak to 23 consecutive months as China accelerated purchases following the recent decline in prices.