Gold Hits One-Month Low, Energy Pressure Drives Hawkish Central Bank Tone
Gold prices fell below US$4,550/oz on Wednesday (April 29), hitting a one-month low, as rising energy prices rekindled inflation concerns and fueled expectations of tighter monetary policy. The surge in oil and gas continued into the new month after US President Donald Trump signaled no deal was imminent with Iran if the nuclear program issue was not resolved, prolonging energy supply disruptions from the Middle East.
The impact was felt in the interest rate channel. Inflationary pressures from energy contributed to deepening divisions within the FOMC and prompted some officials to reject the "easing bias" in the Fed's latest statement, even though interest rates were held on hold. The Bank of Japan also signaled a hawkish tone at its last meeting, adding to the perception that global easing room is shrinking.
For gold, the combination of expensive energy and hawkish central bank tone poses a major burden, as high interest rates increase the opportunity cost of holding non-yielding assets. Market focus now shifts to the ECB and Bank of England decisions scheduled for Thursday, to gauge the extent to which the energy shock will translate into "higher for longer" policies in Europe. (Arl)*
Source: Newsmaker.id
