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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 near $4,080 an ounce in early trading, after falling for three days. The latest US attacks came hours after President Donald Trump said he thought a ceasefire with Iran was “over.” Oil prices surged, with Washington having earlier revoked a waiver that had allowed Tehran 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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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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Spot gold was little changed at $4,078.66 an ounce at 6:50 a.m. in Singapore. Silver rose 0.3% to $58.45 an ounce. Platinum and palladium inched higher, while the Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1% after ending the previous session marginally down.
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