Gold Weakens, Facing Pressure from Interest Rate Hikes and US-Iran Uncertainty
Gold prices fell on Friday (May 22) and are expected to post a weekly decline, as hopes for progress in peace talks between the US and Iran were overshadowed by growing expectations of interest rate hikes.
At 3:57 p.m. US time (19:57 GMT), spot gold fell 0.8% to $4,509.12/oz, while gold futures fell 0.7% to $4,510.70/oz. Weekly, spot gold is projected to fall 0.7% and futures to fall 1.1%.
Kevin Warsh Officially Leads the Fed Amid Expectations of Interest Rate Hikes
The precious metal has come under pressure this week due to rising market expectations for global interest rate hikes, intended to stem the wave of inflation stemming from the surge in oil prices caused by the Middle East conflict.
Minutes from the Federal Reserve's April meeting showed that most policymakers are now considering a rate hike if energy-related inflation persists.
Warsh was sworn in as the new Fed Chair on Friday, facing pressure from President Donald Trump to lower interest rates. However, with inflation remaining well above target, policy easing now appears unrealistic. Markets are now fully pricing in the possibility of a quarter-percentage-point rate hike before the end of the year.
Trade Nation analyst David Morrison noted:
"High oil prices, stemming from Iran's effective closure of the Strait of Hormuz, are raising concerns about inflation remaining elevated for longer. This increases the likelihood that the Fed will maintain a tight monetary policy, rather than loosen it," he said.
"It's hard to imagine Warsh being able to push for a rate cut anytime soon," he added.
"This may displease Trump, who has previously pressured Powell to lower rates to stimulate the economy."
Global Markets and Bonds:
Expectations of rising global interest rates also fueled bond selling, although volatility has eased this week.
Progress in US-Iran Peace Talks:
Hopes rose after a Pakistani diplomat met with Iranian officials, aiming to bridge key differences between Washington and Tehran in an effort to end the more than two-month-old war.
The meeting came two days after Pakistan delivered the US's latest message in the negotiations, according to a Reuters report citing the semi-official Tasnim and ISNA news agencies.
Islamabad has frequently acted as a mediator between the US and Iran, supporting diplomatic efforts to end a conflict that has claimed thousands of lives and disrupted the global economy.
Gold prices remain under pressure from rising interest rates, energy inflation, and uncertainty surrounding Middle East diplomacy, as investors monitor any new developments in the US-Iran peace talks.
Sumber: Newsmaker.id
