Markets Begin to Focus on Interest Rate Risk, Gold Steady
Gold prices (XAU/USD) held steady around $5,000 in early Asian trading on Monday, as markets reassessed the impact of the US-Israel war with Iran on inflation and the direction of global interest rates. Geopolitical tensions remained high, but traders' attention began to shift to this week's central bank agendas.
Generally, geopolitical conflicts tend to boost demand for safe-haven assets like gold. However, this time, rising oil prices due to escalations in the Middle East have raised concerns about more "sticky" inflation, supporting expectations that interest rates will remain high for longer.
The Trump administration stated that the Iran conflict is expected to end within weeks or "sooner." Meanwhile, the Israeli military said the campaign could continue for at least another three weeks, maintaining significant uncertainty.
Over the weekend, US forces targeted military sites on Kharg Island, known as a key hub for Iranian oil exports. Iran subsequently threatened retaliation against US-linked oil facilities in the region, a factor that maintains a risk premium in the energy market.
Rising energy costs are the primary channel affecting gold at the moment. When oil rises, the market tends to anticipate higher inflation, which risks prompting the Federal Reserve to delay interest rate cuts. This condition typically puts pressure on gold because the precious metal offers no yield, making it less attractive when interest rates are high.
In addition to the Fed, several major central banks are scheduled to announce policy this week, including the Reserve Bank of Australia (RBA), the Bank of Japan (BoJ), the European Central Bank (ECB), and the Bank of England (BoE). Generally, the market expects interest rates to remain on hold, except for the RBA, which is considered likely to raise rates again.
Against this backdrop, gold's movement is likely determined by a combination of conflict news and central bank signals. The market will be monitoring whether the oil surge continues to fuel inflation concerns and lead to tighter policy language from the Fed and other central banks, or whether they will ease if there are signs of a de-escalation of the war and energy price pressures begin to ease. (asd)
Source: Newsmaker.id
