Gold Continues to Fall as US Attack on Iran Erodes Peace Hopes
Gold extended its decline after the latest US airstrike on an Iranian military base was seen as risking disrupting peace talks and keeping inflation risks high. Bullion briefly fell by around 1% to US$4,390 per troy ounce, extending its 2.6% decline in the previous two sessions.
A US official called the attack defensive. Washington said its forces shot down four Iranian single-purpose attack drones aimed at commercial vessels, and also targeted a drone launch unit near the Strait of Hormuz. This development heightens market sensitivity to the security of the still-fragile energy route.
The incident occurred just hours after US President Donald Trump said he was "not satisfied" with negotiations with Iran, dampening expectations of a quick breakthrough. Trump also did not specify what steps the US would take to ensure free passage of ships through the Strait of Hormuz, a key issue in efforts to end the war. The near-shutdown of Hormuz since late February has driven up energy prices, which has also shaken the global economy.
Fundamentally, the market views the energy inflation path as unfinished. Even if a deal is finally reached, rising energy prices could potentially keep inflation persistent and force central banks to hold interest rates high for longer, rather than cutting them as widely expected before the war. A high-interest-rate environment typically weighs on gold because it offers no yield, and gold is now said to have fallen more than 16% since the conflict began, nearly erasing its year-to-date performance.
Comments from Fed officials have added to the pressure. Federal Reserve Chair Lisa Cook said inflation is moving in the wrong direction and is prepared to support interest rate hikes if the situation persists. The combination of "sticky" inflation and a tighter policy stance makes it difficult for gold to attract new inflows.
Market participants also believe the safe-haven narrative is losing its near-term appeal. Strategists at Global X ETFs Australia say investors have alternative uses for funds, and gold could test the US$4,000–US$4,250 support area if oil rebounds. At 10:20 a.m. Singapore time, spot gold fell 1.1% to US$4,404.89, silver fell 2% to US$73.19, while the Bloomberg Dollar Index edged up 0.1%, adding to the pressure on precious metals. (asd)
Source: Newsmaker.id
