Gold Steady at US$4,500 After Sharp Drop, Market Eyes Iran War and Interest Rate Direction
Gold prices held steady near US$4,500 per ounce on Monday, after recording their deepest weekly decline since 1983. Market participants are still monitoring developments in the Middle East conflict, which shows no signs of abating, so gold's direction remains sensitive to geopolitical headlines and energy movements.
Tensions surrounding the Strait of Hormuz are back in focus. US President Donald Trump has threatened to attack Iranian power plants if the strait is not reopened, while Tehran has warned it will target critical US and Israeli assets in the region if its energy facilities are attacked. This risk of escalation has kept volatility high, although gold prices have temporarily paused after a sharp decline.
Last week, gold plunged more than 10% as a surge in oil prices reignited inflation concerns. Rising energy costs are seen as potentially holding back interest rate cuts, leading the market to consider a longer easing pause or even the possibility of additional tightening.
Bets on US interest rates are also shifting. Market participants are increasingly weighing the possibility of a Fed rate hike towards the end of the year amid persistent inflation concerns. This shift in expectations typically acts as a headwind for gold because it increases the opportunity cost of holding non-yielding assets.
At other central banks, the ECB, the Bank of England, and the Bank of Japan all held interest rates unchanged last week but signaled their readiness to tighten policy again if inflationary pressures persist. This more cautious policy tone also limits gold's short-term recovery potential.
Against this backdrop, the market will be monitoring whether energy shocks begin to spread to inflation expectations and trigger further adjustments to the global interest rate path. As long as conflicts persist and energy prices remain high, gold has the potential to move within a volatile range, depending on the trade-off between safe-haven demand and interest rate pressures.
Source: Newsmaker.id
