Gold Falls for Seventh Session, Oil Rises and Fed Signals Pressure Precious Metals
Gold extended its decline into a seventh session as escalating conflict in the Middle East pushed oil prices higher and reduced the chances of an imminent US interest rate cut. Bullion briefly fell as much as 2.7% after reversing intraday gains, marking the longest losing streak since October 2023. Silver plunged more than 5%, intensifying pressure on the precious metals complex amid a strong dollar and rising energy inflation risks.
The energy boom has become a key channel of pressure, as stronger oil and gas prices heighten inflation risks, narrowing the path for rate cuts for the Fed and other central banks. Oil rallied on Thursday after Iran and Israel attacked each other's critical energy facilities in the Gulf region. The Federal Reserve on Wednesday held interest rates steady and projected only one cut this year, while Chairman Jerome Powell emphasized that a cut would require a slowdown in inflation; the Fed also said the impact of the conflict makes the US economic outlook "uncertain."
Gold's movement since the outbreak of the war is seen as resembling the 2022 episode, when energy shocks pressured gold through interest rates, even though gold is typically viewed as a hedge. Some market participants believe the strong rally and high volatility have diminished gold's safe-haven function, while some investors are selling gold to meet liquidity and margin calls. Despite this, gold is still up around 9% this year, although since the war began on February 28th through Wednesday's close, its price has fallen nearly 9% from its post-January rally peak.
On the policy front, Powell also addressed his future following the Justice Department investigation, asserting he has no intention of stepping down as chairman until the process is complete and is willing to serve as interim chairman if a replacement is not confirmed by the end of the chairman's term in May. The Fed's independence issue had previously supported gold, but is now being overshadowed by pressure from energy, the dollar, and the repricing of interest rates.
At 9:52 a.m. in London, spot gold fell 2.4% to US$4,704.32 per ounce. Silver fell 5.1% to US$71.54, while platinum and palladium also weakened; the Bloomberg Dollar Spot Index remained relatively stable. (alg)
Source: Newsmaker.id
