Gold Holds Above Yearly Low, Fed Pressure Still Looms
Gold prices held steady after briefly touching a yearly low during the Asian session on Thursday (June 11th). XAU/USD briefly recovered to US$4,118/oz, but the gains began to fade as the market continued to weigh the combination of a weakening US dollar, the escalation of US-Iran tensions, and expectations of a tighter Fed interest rate environment.
Short-term support came from slightly softer US core inflation data. Core CPI in May fell to 0.2% month-on-month from 0.4% the previous month, while the annual rate stood at 2.9%, in line with expectations. This figure weakened the US dollar briefly and opened up room for short covering in gold.
However, fundamental pressures persisted. US headline inflation actually rose from 3.8% YoY in April to 4.2% YoY in May, the highest level in three years. This increase was primarily driven by a 23.5% surge in energy costs, which remains a concern for the market about further inflationary pressures.
US-Iran tensions are also a significant factor. Iran announced the closure of the Strait of Hormuz after the US launched a new wave of attacks on President Donald Trump's orders. This waterway is crucial for global energy shipments, so prolonged disruptions could push up oil prices and heighten inflation risks.
For gold, this situation creates dual pressures. On the one hand, geopolitical conflict could provide safe-haven support. However, on the other hand, rising oil prices and inflation have led the market to price in the possibility of the Fed remaining hawkish. Traders are now pricing in around a 70% chance of a Fed rate hike this year, which is supporting Treasury yields and limiting gold's recovery.
The next focus is on US Producer Price Index (PPI) data and developments in the Middle East conflict. If the PPI again shows strong price pressures, expectations of high interest rates could further strengthen. As long as yields and the dollar remain supported by the Fed's tight outlook, gold's bias remains defensive, even though prices remain above yearly lows. (asd)*
Source: Newsmaker.id
