Gold, Silver Drop, Market Doubts Trump's Iran War Exit Plan
Gold and silver prices weakened, as selling pressure also hit industrial metals and stocks after US President Donald Trump's statement dashed investor hopes for a clear timeline for ending the war. Spot gold prices fell around 3% to around US$4,670 per troy ounce, while spot silver fell more than 5%.
Thursday's decline was fueled by concerns that surging oil prices would push inflation back up, prompting central banks to maintain a tighter stance. In high-interest-rate environments, gold is typically less attractive because it does not yield a yield, unlike interest-bearing assets.
Since the war began, gold has fallen around 11% from its historical high, reflecting a shift in market perception from a "hedge" to an "asset vulnerable to liquidation" when volatility increases. Thursday's correction is also thought to have been triggered by profit-taking ahead of the long Easter holiday, when some market participants chose to reduce risk exposure.
Cause
Trump failed to provide a clear timeline for ending the war, weakening expectations of de-escalation.
Resurgent oil prices are increasing the risk of inflation, reinforcing the narrative of more hawkish central banks.
Ahead of the long Easter holiday, investors tend to reduce positions and secure profits (risk reduction).
Consequence
Gold and silver experienced sharp corrections (gold -3%, silver -5%+), in line with the weakening of risk assets and industrial metals.
Expectations of tighter interest rates are undermining gold's appeal as the opportunity cost of holding zero-yielding assets increases.
Market volatility has the potential to remain high as the direction of conflict and the energy path (including oil risks) remain the main drivers of sentiment.
Source: Newsmaker.id
