Global financial markets are witnessing mixed fluctuations as negotiations in the Strait of Hormuz reach a deadlock. Coupled with a strengthening US dollar and expectations of interest rate hikes from the US Federal Reserve (Fed), both gold prices and the stock market are under significant pressure.

Spot Gold and Silver Prices Under Downward Pressure

Rising Treasury yields and a stronger US dollar have weighed on non-yielding assets like precious metals. At the close of the US trading session on Thursday:

• Spot gold: Traded at $4,274.70/ounce (down 0.26%).

• Spot silver: Traded at $63.670/ounce (down 1.02%).

Overview of US and European Stock Markets

Risk-off sentiment has engulfed global stock markets due to concerns over oil prices and bond yields. In North America, markets closed mostly flat following a highly volatile session:

• S&P 500: 7,704.13 points (-0.1%).

• Dow Jones: 51,349.98 points (-0.3%).

• Nasdaq Composite: 26,939.37 points (+0.1%).

• Russell 2000: 2,835.57 points (-0.1%).

In Europe, major indices broadly closed in the red:

• Stoxx Europe 600 (Europe): 636.43 points (-0.55%).

• DAX (Germany): 25,266.53 points (-0.57%).

• CAC 40 (France): 8,081.43 points (-0.52%).

• FTSE 100 (UK): 10,679.99 points (-0.24%).

US Economic Data Reinforces the Likelihood of a Fed Rate Hike

Markets are leaning towards the scenario of the Fed continuing to tighten monetary policy based on positive macroeconomic data:

• September flash PMI: Recorded the strongest private-sector growth in over 5 years.

• Labor and housing markets: Weekly jobless claims fell to 197,000; August new home sales increased by 6.4% (reaching a 684,000 annualized rate).

• Financial indicators: The US Dollar Index held around 101, while the 10-year Treasury yield maintained at 5.1%. Fed funds futures priced in a 66% - 70% probability of an October rate hike.

Strait of Hormuz Tensions Push Oil Prices Higher

The geopolitical situation in the Middle East continues to be a direct shock to energy markets. Deadlocked negotiations between the US and Iran have elevated inflation risks:

• Brent Crude: Traded near $105.42/barrel (bearing a high seaborne shipping premium).

• WTI Crude: Traded around $94.30/barrel. Although geopolitical risks typically drive safe-haven demand for gold, surging crude oil prices simultaneously fuel inflation expectations and bond yields, creating a mixed picture for precious metals.

Source: Kitco