Gulf Attacks Lift Dollar and Test Interest Rate Outlook, Gold Falls
Gold prices weakened after a series of military attacks in the Persian Gulf reduced hopes for a US-Iran peace deal anytime soon, while reviving concerns that inflation could persist and keep interest rates high for longer. Bullion briefly fell as much as 1.9% as the dollar strengthened, while clashes between the US and Iran around the Strait of Hormuz confirmed that operational tensions remain high despite both sides claiming progress toward an interim agreement.
Energy volatility once again became a major channel shaping gold's direction. Oil prices fluctuated wildly following developments in the Middle East, with Brent retracing US$100 per barrel after plunging more than 7% on Monday. This situation occurred shortly after President Donald Trump stated that negotiations with Tehran to extend the ceasefire and reopen the strait were still ongoing, while Secretary of State Marco Rubio suggested that talks would likely take several days. TD Securities noted that optimism about a deal provided some support, but conditions remained fragile as inflation risks still loomed over the precious metal and traders tended to be on the selling side.
Structural pressures have not disappeared. Gold has fallen more than 14% since the conflict broke out in late February when an energy surge prompted markets to raise bets on interest rate hikes; higher borrowing costs typically weigh on gold because it offers no yield. The World Gold Council believes a sustained recovery requires gold to uncouple from risk assets, and a more solid recovery is likely to be seen closer to year-end as energy markets take time to rebalance. At 3:48 p.m. in New York, spot gold fell 1.4% to US$4,506.48 per ounce, while silver fell 1.5% to US$76.92, and other precious metals also weakened.
Source: Newsmaker.id
