Gold Strengthens, But High Interest Rate Prospects Still Loom
Gold (XAU/USD) strengthened on Monday after opening lower, recovering to around $4,732/oz from an intraday low of around $4,632/oz. The gains came as risk aversion returned to the fore following escalating US-Iran tensions.
Optimism last week following the announcement of a two-week ceasefire faded after US-Iran talks in Islamabad over the weekend ended without a breakthrough. In response, US President Donald Trump ordered a naval blockade of the Strait of Hormuz, with CENTCOM declaring the operation to begin Monday at 10:00 AM ET (14:00 GMT).
On the Iranian side, the IRGC warned that any military vessels approaching the Strait of Hormuz would be considered a ceasefire violation and could potentially trigger a harsh response. Market concerns about further escalation also boosted energy prices, with WTI rallying back to around $97, up about 7.5% at the time of writing.
Rising oil prices have heightened inflation concerns and reinforced expectations that US interest rates will remain high for longer, or even potentially rise if the conflict prolongs, thus supporting the US dollar and bond yields. The latest US inflation data showed a boost in energy, with headline CPI in March rising 0.9% (MoM) from 0.3% in February, while the annual rate rose to 3.3% (YoY) from 2.4%.
While gold is often viewed as an inflation hedge and safe haven, its appeal remains tempered by the opportunity cost amid the prospect of high interest rates. Looking ahead, market focus turns to the US PPI on Tuesday and a series of Fed officials' comments throughout the week, which have the potential to shape interest rate expectations as well as the direction of the dollar and gold. (gn)
Source: Newsmaker.id
