Why Does Gold Weaken as Conflict Heats Up? Here's the Trigger!
Gold prices weakened and fell back below the psychological level of $5,000 per troy ounce in Asian trading on Monday (March 16), amid growing inflation concerns triggered by surging energy prices due to the US-Israel war with Iran. Tensions show no signs of abating, leading the market to assess the risk of inflation lingering longer than previously expected.
Spot gold fell 0.5% to $4,967.21 per ounce. The weakening occurred as market participants became more cautious ahead of this week's Federal Reserve policy meeting, amid concerns the central bank could maintain its hawkish tone if inflation remains high.
Market focus was on oil, which remained above $100 per barrel, although it pared some gains after US President Donald Trump said coalition talks to reopen key shipping lanes blocked by Iran were still underway. However, Trump's claim that the end of the war was "near" was reportedly rejected by Tehran.
Instead of receiving a full boost as a safe-haven asset, gold has been relatively subdued since the conflict escalated. The market believes that if high energy prices prolong inflationary pressures, interest rates could potentially remain high for longer, undermining the appeal of non-yielding gold. ANZ noted that gold is also "lagging behind" due to the strengthening US dollar, rising yields, and uncertainty about the Fed's policy direction. ANZ also mentioned liquidation to meet margin calls, which has added pressure on gold prices.
Nevertheless, ANZ believes that gold's base case as a safe haven against geopolitical uncertainty remains intact, especially if tensions escalate or market volatility increases again.
In other metals markets, movement was mixed as the dollar remained strong. Silver fell 1.8% to $79.1805 per ounce, while platinum edged up 0.2% to $2,031.43 per ounce.
Market participants are now awaiting two key triggers: developments in the conflict and its impact on energy prices, as well as the Fed's latest signals regarding inflation risks and the future direction of interest rates.
Source: Newsmaker.id
