Gold Prices Continue to Weaken, Market Shifts from Safe Haven to Interest Rate Pressure
Gold prices fell again in Thursday's trading after the market assessed that President Donald Trump's latest speech on Iran did not provide clarity on the end of the war. Spot gold fell 2% to US$4,664.39 per ounce, while US gold futures weakened 2.5% to US$4,691.10 per ounce. This pressure arose as the US dollar and Treasury yields strengthened, diminishing gold's appeal as a non-yielding asset.
In general, gold's weakening this time was not due to market confidence. On the contrary, Trump's speech, which left open the possibility of further attacks on Iran, sent oil prices soaring, fueling renewed concerns about energy inflation. As inflation expectations rose, US bond yields also pushed higher.
This is where gold began to lose support. While typically considered a safe haven during geopolitical tensions, gold becomes less attractive when the market perceives interest rates as potentially remaining high for longer. Reuters wrote that the rising dollar, rising Treasury yields, and declining expectations for a Fed rate cut were the main combination pressuring gold prices. The market's probability of a December rate cut even dropped to 12% from 25% previously, indicating that investors are now increasingly cautious about betting on monetary easing.
In addition to macro factors, there are technical elements contributing to the pressure. Gold had previously rallied strongly, reaching a two-week high, so the recent decline also indicates profit-taking and position restructuring. Reuters even noted that gold experienced an 11% decline throughout March, its worst monthly decline since 2008, indicating that the precious metals market is currently highly sensitive to changes in sentiment, the dollar, and the direction of interest rates.
XAU/USD fell again not because the risk of a war was lost, but because the market is now more concerned about the continued effects of the war on inflation, yields, and interest rates. As long as the dollar remains strong, yields remain high, and the market remains uncertain about the Fed's imminent interest rate cut, gold's recovery potential remains limited in the short term.
Cause:
The US dollar strengthened after Trump's speech on Iran, putting pressure on dollar-priced gold.
Treasury yields rose as the market worried that surging energy prices would push inflation higher.
Oil prices surged sharply after Trump confirmed that attacks on Iran would continue, increasing the risk of energy inflation.
Expectations for a Fed rate cut have receded, with the chance of a December rate cut dropping to 12% from 25%.
Profit-taking emerged after gold previously rose to a two-week high. (Zaf)
Source: Newsmaker.id
