Gold Under Pressure, High Inflation Sparks Interest Rate Hike Concerns
Gold and other precious metal prices came under sharp pressure after US inflation data showed the biggest increase in more than three years. This sparked concerns that the Federal Reserve (The Fed) might soon raise interest rates.
Spot gold traded down around 2.7% after the release of the inflation data, hitting an intraday low before the report was released. Annual inflation rose 4.2%, the highest level since early 2023, driven by surging energy prices. Economists expect prices to continue rising in the coming months, so the possibility of an interest rate hike remains a hot topic among Fed officials.
Spot gold fell 2.5% to US$4,154.60 per ounce as of 1:53 p.m. London time. Meanwhile, silver fell 1.3% to US$64.49, platinum weakened 3.1%, and palladium remained relatively stable. The Bloomberg Dollar Spot Index fell 0.1%, indicating a slight weakening of the dollar.
Despite this, core inflation—the Fed's benchmark—increased only 0.2%, lower than the previous month and below the 0.3% estimate. This provided some relief to investors worried about an imminent interest rate hike.
Pressure on gold was already evident before the report's release, as concerns over the sustainability of peace in the Middle East grew. The US and Iran traded blows after a US military helicopter was shot down, sparking fresh tensions in the Strait of Hormuz. American forces targeted Iranian sites near the strategic waterway, while Iran's Revolutionary Guard Corps launched missiles at four American targets.
This latest clash threatens the fragile ceasefire and risks extending the near-total closure of the Strait of Hormuz, a vital energy shipping route from the Middle East to global markets. Oil prices briefly rallied after President Donald Trump declared that Iran must pay a price for stalling peace negotiations.
Gold prices are currently around 20% below their pre-Iranian conflict levels in late February. Gold's decline through its 200-day moving average triggered additional selling as this level is of concern to institutional investors. According to Suki Cooper, Head of Global Commodity Research at Standard Chartered Plc, "Price movements will be more volatile in the short term as the likelihood of interest rate hikes increases. News from the Middle East remains important; if it subsides, gold is likely to recover as liquidity needs ease."
Source: Newsmaker.id
