Gold Under Pressure Despite Heated Geopolitical Tensions
Gold prices weakened again despite rising geopolitical tensions, as the oil and gas rally heightened inflation concerns and dampened expectations of interest rate cuts.
Commerzbank Research analyst Barbara Lambrecht believes gold has “failed to benefit” from the geopolitical crisis, as the energy surge actually increases inflation risks that could force central banks to take restraining measures.
The surge in energy prices is changing the way the market interprets gold. If inflation rises again, the room for monetary policy easing narrows, potentially keeping real interest rates and yields high for longer—conditions that are typically unfavorable for non-yielding assets like gold.
In the US, this pressure coincided with the latest consumer spending data showing spending rose only slightly in January amid weaker-than-expected economic growth. The report added to concerns that price pressures were already building even before the attack on Iran, reinforcing the narrative that inflation could become more “sticky” when energy prices return.
US consumer sentiment also weakened. Consumer confidence indicators reportedly fell to a three-month low, as concerns in recent weeks have grown about the impact of rising gasoline prices due to the conflict.
The interest rate market is moving in line with this theme. Market participants now see little chance of a rate cut at next week's Fed meeting, and about an 80% chance of a rate cut this year. If inflationary pressures persist, the return of the rate-cutting cycle could be delayed, as President Donald Trump continues to push for rate cuts.
Despite the pressure, gold has still posted a gain of around 16% year-to-date and remains relatively above the US$5,000 per ounce threshold, suggesting structural support has not completely disappeared.
At 4:04 p.m. in New York, spot gold fell 1.2% to US$5,019.68 per ounce and was on track for a weekly decline of around 3%, potentially its first consecutive weekly decline since November.
Silver fell 4.2% to US$80.29, while platinum and palladium also weakened. The Bloomberg Dollar Spot Index rose 0.6% and is on track for a weekly gain.
Source: Newsmaker.id
