Gold Falls as US-Iran Clashes Derail Peace Hopes
Gold prices fell to a two-month low on Thursday (May 28) as the US-Iran clashes raised the risk of a breakdown in peace talks and kept inflation concerns high. Bullion briefly fell by around 2% to below US$4,400 per troy ounce, while a stronger dollar added pressure.
The US military reportedly attacked a military site and other targets around the Strait of Hormuz. The IRGC later claimed to have targeted the US base used to launch the attack. US President Donald Trump said he was "not satisfied" with negotiations with Iran and did not elaborate on steps to ensure safe shipping in Hormuz, a key flashpoint. Meanwhile, oil futures rallied.
The energy boom stemming from the ongoing blockage of the Strait of Hormuz is seen as potentially keeping inflation high and forcing central banks to hold interest rates longer, rather than cut them as widely expected before the conflict. High interest rates are typically unfavorable for gold because they provide no yield, while a stronger dollar makes gold more expensive for many buyers.
Gold has fallen more than 17% since the conflict broke out in late February, nearly erasing its year-to-date gains. Fed Chair Lisa Cook reiterated Wednesday that inflation is moving in the wrong direction and is prepared to support interest rate hikes if they persist, bolstering the narrative of tighter policy.
Options market signals also suggest bullish positions are weakening. The cost skew for hedging, or betting on price increases, on the largest gold ETFs in the next three months is near its lowest level since December, indicating waning interest in chasing gains.
At 10:05 a.m. London time, spot gold fell 1.4% to US$4,390.28 per ounce. Silver fell 1.6% to US$73.42, while platinum and palladium also weakened. The Bloomberg Dollar Spot Index rose 0.1%, posting its third consecutive day of gains. (Arl)*
Source: Newsmaker.id
