(RTTNews) - Gold prices were sharply lower on Friday as Middle East worries and uncertainty over the Federal Reserve's rate path persist.
Spot gold fell 1.2 percent to $4,054.86 an ounce but headed for its first monthly gain in five, rising nearly 2 percent in July, helped by softer-than-expected U.S. inflation reading for June and reports of negotiations between Iran and Oman to regulate traffic through the Strait of Hormuz. U.S. gold futures were down 1.2 percent at $4,049.30.
The dollar headed for its worst week in three months as markets question the Federal Reserve's resolve to reduce inflation to its 2 percent target.
The 30-year U.S. Treasury yield hovered near 19-year highs while short-end yields eased, steepening the curve amid growing doubts over the Fed's ability to keep inflation in check.
Data showed on Thursday that headline annual PCE inflation, closely tracked by the Federal Reserve, cooled in June but remained well above the central bank's target.
According to CME FedWatch Tool, traders are currently pricing in a 59 percent chance of a rate hike at the Fed's September meeting.
On the geopolitical front, a drone strike on gas vessels at Egypt's Damietta port has intensified fears of the U.S.-Iran conflict widening across the Middle East, drawing more countries into the roughly five-month-old war and posing threats to navigation through the Suez Canal, one of the last remaining export routes for Saudi oil.
Iran's Islami Revolutionary Guard Corps (IRGC) destroyed two drone hangars, along with a fuel storage facility at the U.S.-operated Ali Al Salem airbase in Kuwait and said that Tehran's military actions would persist until the complete eviction of U.S. "occupying and looting forces" from the region.
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