GOLD: Gold Breaks Below Support, Inflation Worries Offset Save Haven Flows

Gold rallied early in Monday’s APAC session on increased safe-haven flows following an escalation of the Middle East conflict. It reached a high of $4353.38/oz before falling as derailed US-Iran talks to open the Strait of Hormuz would push average oil prices higher, which could trigger interest rates hikes. There is now a full 25bp Fed hike priced in by year end with strong May payrolls signalling that monetary policy is more likely to tighten in the US rather than ease. Bullion is down 0.2% to $4317.6 after falling to $4300.1, breaking below support at $4306.4 opening $4200.

• Israel struck military targets across Iran in retaliation for Iran targeting Israel earlier. There were also reports that Saudi Arabia triggered its missile alert amid reports of the Saudi Prince Sultan base being targeted. Iran denied it was them. However, the IDF detected more Iranian missiles heading to Israel.
• Silver has range traded around $67.80/oz. It fell to $66.94 before recovering to around $67.84.
• Asian equities are sharply weaker while the S&P e-mini is up 0.2% and Nasdaq +0.5%. The USD index is slightly lower but US 2-year yield is higher. Oil prices are up with WTI +3.7% to $93.84/bbl.
• The Fed’s communication blackout has begun ahead of the 17 June FOMC decision. US May NY Fed 1-yr inflation expectations and Germany’s April factory orders are released today.