Gold Near One-Month Low, Weighed Down by Iran and Interest Rate Outlook
Gold prices weakened on Friday (May 1) and remained near a one-month low, amid uncertainty over the ongoing conflict in Iran and its impact on global interest rate expectations. Market liquidity was also relatively thin due to holidays in most of Asia.
Spot gold fell 1.1% to US$4,570.06 per ounce at 5:12 a.m. ET, while gold futures fell 1% to US$4,582.01 per ounce. This pressure kept gold on the defensive after a weak performance in the past two months.
At the time of this article's publication, gold was down nearly 1.29% to US$4,562.00. However, on a monthly basis, spot gold fell around 1% in April, continuing its decline after a sharp correction in March. The market believes rising inflation triggered by the energy surge caused by the conflict in Iran has driven stronger capital flows into the dollar, thus reducing gold's appeal even though geopolitical tensions have not subsided.
Hawkish signals from several central banks have increased pressure on the precious metal. The Fed, ECB, Bank of England, and Bank of Japan have all highlighted the risks of energy-driven inflation and signaled imminent policy tightening, which, in effect, increases yields and the opportunity cost of holding non-yielding assets like gold.
On the geopolitical front, the US-Iran standoff shows no signs of abating. Iranian Supreme Leader Mojtaba Khamenei's statement asserting Tehran's control over the Strait of Hormuz has added to uncertainty, while the market believes the dominance of energy inflation concerns is causing gold to lag behind the dollar. Market participants will be focused on developments in the conflict, oil price movements, and the tone of central bank communications regarding interest rate paths. (srh)*
Source: Newsmaker.id
