Gold Weakens, Fed Hawkish Overpowers Iran Sentiment
Gold prices fell on Friday (June 20th) and are on track for a third consecutive weekly decline, pressured by a stronger US dollar and hawkish signals from the Federal Reserve. Spot gold weakened 0.6% to $4,184.33 per ounce at 02:11 GMT, while US gold futures for August delivery fell 1% to $4,202.10.
The US dollar hovered around a one-year high, making greenback-priced gold more expensive for buyers using other currencies. This pressured gold demand, especially as the market also factored in the prospect of higher US interest rates.
Monetary policy pressures increased after the Fed kept interest rates unchanged, but the latest projections show nine of 19 policymakers expect a rate hike this year. This was Kevin Warsh's first meeting as Fed Chairman, with his tone seen as more assertive on inflation.
The market now sees an 87% chance of a US interest rate hike in December, up from 61% before the Fed decision, according to the CME FedWatch Tool. For gold, high interest rate expectations pose a headwind because the precious metal offers no yield.
The gold rally that emerged after the US-Iran peace deal was also short-lived. Easing energy supply risks after tankers resumed transit through the Strait of Hormuz and the US lifted its blockade on Iran helped ease inflation concerns, but not enough to offset the pressure from the dollar and the Fed.
Goldman Sachs still expects gold to rise to $4,900 an ounce by December, although that target has been trimmed from its previous projection of $5,400 because the bank no longer expects a Fed rate cut this year.
Other precious metals also weakened. Silver fell 1.5% to $64.83 an ounce, platinum weakened 1.3% to $1,674.47, and palladium fell 0.8% to $1,268.65. The market's next focus will be on the direction of the US dollar, Treasury yields, the likelihood of a Fed interest rate hike, and the sustainability of energy flows through the Strait of Hormuz.
Source: Newsmaker.id
