Gold Stagnates Above US$4,200, Bearish Pressure Remains
Gold prices, or XAU/USD, moved relatively flat during the European session on Thursday (June 12th) after paring intraday losses. This movement indicates that the market remains cautious in responding to the uncertainty surrounding the peace deal between the United States and Iran, while the US dollar failed to maintain its previous gains.
Support for gold came from a weakening US dollar, making dollar-denominated commodities more attractive to foreign buyers. However, gold's upside remains limited as the market continues to monitor expectations of a hawkish Federal Reserve policy stance, especially after US inflation data again showed pressure.
US President Donald Trump previously stated that a deal with Iran had been reached and that the final document could be signed soon, possibly even by the weekend. However, this optimism quickly faded after Iran stated that no final decision had been made. Several reports also stated that several key issues, including access to the Strait of Hormuz and frozen Iranian funds, remain unresolved.
Geopolitical uncertainty intensified after Iranian forces reportedly blocked a tanker passing through the strategic waterway without coordination. Furthermore, reports of the US military intercepting and shooting down two Iranian drones near the Strait of Hormuz have kept the geopolitical risk premium high. This situation has boosted oil prices and rekindled concerns about energy inflation.
From a macroeconomic perspective, US CPI and PPI data this week showed signs of accelerating inflation. This reinforces expectations that the Fed may maintain high interest rates for longer or even increase borrowing costs towards the end of the year. This situation puts pressure on gold because the precious metal does not provide a return like bonds or other interest-bearing instruments.
In my opinion, gold is currently caught between two major forces. On the one hand, Middle East geopolitical risks and uncertainty surrounding the Strait of Hormuz continue to maintain safe-haven demand. However, on the other hand, expectations of a more hawkish Fed, rising yields, and support for the US dollar are the main obstacles to XAU/USD's rise.
As long as there is no final certainty regarding the US-Iran negotiations, gold has the potential to remain volatile, with a tendency to be limited by interest rate pressure.
Source: Newsmaker.id
