Gold Falls as Yield Surges and Oil Prices Weigh In
Gold prices weakened sharply during Tuesday's trading (Aug 18) as a surge in global bond yields and rising energy prices once again dampened the precious metal's appeal. Spot gold fell approximately 1.1% to US$4,364.90 per troy ounce, while the US gold contract for December delivery closed 1.2% lower at US$4,420.60.
The primary pressure stemmed from rising long-term bond yields in the United States, Japan, and Germany, which hit multi-decade highs. High yields increase the opportunity cost of holding gold—since bullion generates no interest income—prompting some investors to reduce their positions.
Oil prices, strengthening for a third consecutive session, also added to the pressure. A stalemate in US-Iran peace talks, Iran's increasingly aggressive military stance, and Tehran's decision to maintain the closure of the Strait of Hormuz heightened the risk of energy supply disruptions. These conditions reignited concerns that inflation could rise.
Rising energy prices mean the market has not fully ruled out the possibility of interest rates remaining high or being raised again to curb inflation. This persists despite earlier US economic data showing a weakening labor market, more controlled inflation, and soft retail sales figures for July.
Despite the correction, some analysts maintain a positive medium-term outlook for gold. However, Bank of America suggests that investor demand needs to rise significantly for gold to move toward US$5,000 per troy ounce. The downward pressure extended to other metals as well, with silver, platinum, and palladium also experiencing sharp declines.
Newsmaker Analysis: The current correction in gold prices is driven by a combination of rising yields, surging oil prices, and inflation concerns. If selling pressure persists and the US$4,350 level is breached, gold could potentially test the US$4,320 to US$4,300 range. Conversely, if yields begin to decline and buyers re-enter the market, a recovery above US$4,400 could open the door to the US$4,420–US$4,450 range. Attention now shifts to the FOMC minutes, which could determine the direction of interest rates and the subsequent momentum for gold. (yds)
Source: Newsmaker.id
