Gold Falls, Inflation Looms Again
Gold prices weakened on Monday (June 29th) as renewed tensions in the Middle East rekindled inflation concerns. This has led the market to expect high interest rates to persist for longer, thus dampening gold's appeal.
At 9:35 a.m. New York time (13:35 GMT), the spot gold price fell 1.1% to US$4,042.43 per troy ounce. Meanwhile, gold futures fell 1.0% to US$4,054.40 per troy ounce.
Pressure on gold emerged after the United States and Iran reportedly agreed to halt retaliatory attacks in the Strait of Hormuz. This agreement is expected to allow ships to return to the vital waterway more freely. However, other reports indicate that Iran has not officially confirmed the agreement.
Talks between Washington and Tehran are said to be continuing to discuss the details of implementing the memorandum of understanding. The United States has also reportedly offered to meet with Iran in Doha, Qatar, although details have not yet been finalized. The meeting could take place as early as Tuesday.
Although oil prices have stabilized around pre-war levels, the surge following the latest tensions continues to raise concerns about energy inflation. If energy price pressures increase again, central banks, including the Federal Reserve, could maintain a tighter stance or even raise interest rates before the end of the year.
For gold, high interest rates pose significant pressure because the precious metal offers no yield. Therefore, although gold is often considered a hedge against rising inflation, expectations of rising interest rates are making investors more cautious about gold's movements.
Source: newsmaker.id
