Gold Falls for a Third Day, Iran War Inflation Risks Pressure Bullion
Gold prices extended their decline for a third day, with investors focused on the prospects for US-Iran negotiations, while the unclear outcome of the Strait of Hormuz closure continues to raise inflation risks. Bullion briefly fell as much as 0.9% to trade around US$4,557 per ounce, after weakening 2.4% in the previous two sessions.
Pressure stems from escalating energy supply risks: the US has signaled it will maintain a naval blockade of Iranian ports to curb Tehran's oil exports. On the diplomatic front, mediators in Pakistan expect Iran to submit revised proposals in the coming days, according to a CNN report, leading the market to weigh the chances of de-escalation versus a more prolonged energy disruption scenario.
Rising energy prices are seen as increasing the likelihood of central banks keeping interest rates high for longer or even raising them again, a situation that poses a drag on non-yielding gold. At the same time, rising bond yields increase the opportunity cost of holding gold, intensifying selling pressure as the inflation narrative returns to prominence.
Market participants are also monitoring a series of interest rate decisions in the US, the European Union, the UK, and Canada in the coming days. The Bank of Japan held its benchmark interest rate at 0.75% on Tuesday in a split vote, which is seen as increasing the chances of a June hike, while the Federal Reserve is widely expected to hold rates at its meeting on Wednesday.
In terms of market positioning, gold has fallen nearly 14% since the conflict began in late February, while oil prices have surged. Technical pressure also emerged after a break below the support area around US$4,650, according to Ole Hansen of Saxo Bank, with the market's near-term focus remaining on the effectiveness of mediation and the direction of the Strait of Hormuz, as the reopening of the waterway and the decline in oil prices are seen as key positive catalysts for the metal. At 9:54 a.m. London time, spot gold fell 0.5% to US$4,574.72 per ounce, while the Bloomberg Dollar Index rose 0.1%. (gn)*
Source: Newsmaker.id
