Gold Under Pressure, ETF Outflows and Dollar Yields Add to the Weigh
Gold prices weakened again, extending their downtrend since the outbreak of the Iran war, even though the precious metal is typically viewed as a safe-haven asset. Gold has fallen every week since the US and Israel attacked Iran last month, as the market focuses more on the energy boom that has raised inflation risks and changed interest rate expectations.
The main pressure comes from a strengthening US dollar and rising Treasury yields, which increase the opportunity cost of holding gold because it offers no yield. At the same time, some investors are selling gold to cover losses in other assets, making gold's movement more fragile as market volatility increases.
Monetary policy signals have added to the pressure. The Federal Reserve kept interest rates on hold at its midweek meeting, and Fed Chairman Jerome Powell emphasized that any new easing requires tangible progress in reducing inflation. These communications tempered expectations of a quick cut, supporting the dollar and yields—two factors that are typically negative for gold.
Fund flows also moved against the safe-haven narrative. Gold-backed ETFs are expected to record their third consecutive week of outflows, with holdings falling by more than 60 tons during the period, and global holdings erasing all gains since the start of the year. ETFs' sensitivity to interest rates means outflows are likely to continue as markets price in tighter policy for longer.
Despite the sharp correction, gold is still around 5% higher year-to-date, having touched a record near US$5,600 in late January, buoyed by investor enthusiasm, central bank buying, and concerns about the Fed's independence. JPMorgan Private Bank believes the initial surge as the conflict escalated suggests gold's geopolitical hedging function remains intact, but market focus could shift from inflation to recession risks if the war drags on—a situation that could potentially revive gold's safe-haven appeal.
In New York trading, gold fell 1.7% to US$4,569.23, heading for an eighth straight day of losses, its longest since October 2023. The decline pulled the 14-day Relative Strength Index (RSI) below 35, approaching an area considered by some market participants to be "oversold," although high volatility leaves the market vulnerable to further selling pressure.
Source: Newsmaker.id
