Gold Under Pressure at 4,640, Oil Rises and Tight Liquidity Weigh on Safe Havens
Gold prices (XAU/USD) remained on the defensive around US$4,640 at the start of Friday's Asian session, continuing to experience pressure after the high volatility of the past few days. While Middle East tensions typically support safe-haven assets, gold is currently struggling to recover as the market focuses more on the risks of energy inflation and liquidity conditions.
There are three main factors weighing on gold. First, the surge in oil and energy prices due to the escalation of the US-Israel war with Iran has reignited inflation concerns. When energy inflation rises, markets tend to delay expectations of interest rate cuts, keeping yields high, which weighs on non-yielding gold.
Second, the Fed's hawkish tone has strengthened the US dollar. After the Fed held interest rates on hold, Chairman Jerome Powell highlighted the inflation risks from rising oil prices and said the option of a rate hike was discussed. A stronger dollar typically pressures USD-denominated commodities, further weighing on gold despite hedging demand.
Third, tightening liquidity and margin calls have driven selling in the most liquid assets, including gold. When markets are volatile, some investors sell gold to raise cash or cover margin obligations, so selling pressure can arise even when geopolitical headlines are hot.
On the other hand, geopolitical risks remain a cushion. Iran has expressed "zero tolerance" if energy infrastructure is attacked again, while Saudi Arabia has signaled that restraint will not be indefinite. However, to initiate a more stable recovery, gold typically needs one of two things: USD/yield weakens or risk escalation increases sufficiently to overcome interest rate pressures. (CP)
Source: Newsmaker.id
