Gold Falls, Fed and Iran's Hawkish Signals Weigh on Sentiment
Gold prices continued their decline on Friday (June 19th) and headed for a third weekly decline, as the market weighed the delay in permanent peace negotiations in the Middle East and the prospect of higher US interest rates. Bullion fell as much as 2.1% before trading down 1.5% to $4,146.98 per ounce at 12:19 p.m. London time.
The main pressure still comes from the Federal Reserve. Fed Chairman Kevin Warsh's hawkish tone regarding inflation has made the market increasingly price in the possibility of an interest rate hike. For gold, higher interest rates increase the opportunity cost of holding non-yielding assets and could restrain investment inflows.
The US dollar also remains a limiting factor. The Bloomberg Dollar Spot Index moved steadily but maintained its weekly gain of around 0.8%. A strong dollar tends to pressure gold because it makes bullion more expensive for foreign buyers.
Geopolitically, the US and Iran suspended talks on a permanent deal and Tehran's nuclear program after tensions escalated in southern Lebanon. This delay adds to uncertainty about the continuation of the peace process, despite the signing of a preliminary agreement.
Ships carrying stranded oil began moving out of the Strait of Hormuz after the preliminary agreement, alleviating some concerns about energy shortages. However, shipping traffic thinned again on Friday morning, and the market still believes that restoring oil and LNG volumes through the route could take months.
Other precious metals also weakened. Silver fell 1.6% to $64.60 per ounce, while platinum and palladium also moved lower. Market focus will now be on the direction of the Fed's interest rate policy, the movement of the US dollar, developments in US-Iran negotiations, and the speed of the restoration of energy flows through the Strait of Hormuz. (arl)
Source: Newsmaker.id
