The price of gold (TVC: $GOLD) bullion briefly dipped below the key support level of $4,000 U.S. an ounce as the outlook for inflation in the U.S. remains in flux.
Gold’s price fell as low as $3,960 U.S. an ounce on July 14 as crude oil prices surge higher with the U.S. and Iran renewing attacks on each other and the Strait of Hormuz closed again.
Brent crude oil, the international standard, is up another 3% and trading at $85.79 U.S. per barrel as shipping through the Strait of Hormuz near Iran remains uncertain.
Higher oil prices are likely to cause a spike in inflation, leading the U.S. Federal Reserve to raise interest rates to lower it.
Higher interest rates are a negative for non-yielding assets such as gold.
However, the price of bullion quickly rebounded on July 14 as the official U.S. inflation report for June came in better than expected.
Gold’s price jumped to $4,091 U.S. an ounce as the U.S. Consumer Price Index (CPI) for June came in at an annualized 3.5%, weaker than the 3.8% expected among economists.
Inflation in the U.S. softened in June as energy prices eased during a ceasefire between the U.S. and Iran that has now proved to be temporary.
While oil prices are again marching higher, the weaker inflation data for June has, for the time being, taken some pressure off the U.S. Federal Reserve to raise interest rates.
Still, Wall Street is currently pricing in two 25-basis point rate hikes from the U.S. central bank this year, one in September and another in December.
Gold’s price hit an all-time high of $5,589.38 U.S. per ounce on Jan. 28 of this year.
