Gold Strengthens as Oil Prices Fall, Reducing Inflation Risks
Gold prices extended gains and broke through US$4,750 per troy ounce, amid weaker oil prices that helped ease inflation concerns. New York gold futures rose 1.4% to US$4,758.00, reflecting a renewed interest in hedge assets as energy price pressures eased.
The decline in oil is seen as improving the outlook for precious metals by reducing inflation risks from the energy side. At the same time, optimism regarding the possibility of a US-Iran agreement to resume peace talks has supported risk sentiment and eased market concerns about an imminent Fed interest rate hike.
The main transmission channels are seen in declining bond yields and a weakening US dollar, which provide room for gold to strengthen. MUFG believes that the decline in oil prices and easing inflation concerns have pushed yields and the dollar lower, thus supporting gold prices.
Going forward, the market will monitor whether the oil weakness continues and how yields and the dollar move in line with policy expectations. US-Iran geopolitical headlines and any new signals regarding the trajectory of energy inflation remain key factors that could alter gold's short-term direction.
Source: Newsmaker.id
