Gold Under Pressure, Silver Plummets Amid Global Market Selloff
Gold prices fell sharply on Tuesday (June 23rd) after a selloff swept across various global financial markets. Spot gold briefly weakened to nearly US$4,091 per troy ounce, approaching its lowest level seen earlier this month. Meanwhile, silver also came under further pressure, falling by around 5%. This pressure occurred as technology stocks led the global stock market decline and prompted investors to trim their positions in various assets, including precious metals.
Although gold is known as a safe haven asset, the price of precious metals can still fall when there is significant cross-market pressure. Under such conditions, investors often sell gold to cover losses in other assets or maintain portfolio liquidity. This means that when the market experiences a major selloff, gold does not always immediately rise. In fact, gold can weaken when the need for liquidity increases and the US dollar strengthens.
Pressure on gold is increasing as the market remains concerned about inflation risks and the direction of Federal Reserve policy. Federal Reserve Bank of Chicago President Austan Goolsbee expressed concern that inflation remains above target and is moving in a negative direction. The hawkish stance of Fed Chairman Kevin Warsh has also led investors to reassess the likelihood of an interest rate hike, which is a drag on gold as the precious metal offers no yield.
The continued strengthening of the US dollar has also posed an additional burden. Since the Fed's last meeting, the dollar index has risen more than 1%, making dollar-priced gold more expensive for buyers using other currencies. Deutsche Bank believes the shift in expectations regarding the Fed, coupled with continued strong US economic data, are the main factors weighing on gold prices. The bank cut its gold forecast to US$4,300 for the third quarter and US$4,800 for the end of the year, while Goldman Sachs also lowered its year-end target to US$4,900.
Looking ahead, market attention will be focused on the release of US Personal Consumption Expenditures (PCE) data on Thursday. This data is the Fed's favorite inflation indicator and is expected to provide new direction for the market. If the PCE shows inflation remains high, gold risks further pressure and moves closer to the US$4,000 area. However, if inflation data eases, gold has the potential to hold its decline and return to the US$4,000 to US$4,300 range, pending further certainty regarding the Fed's policy direction and developments in the US-Iran peace process. (arl)
Source: Newsmaker.id
