US-Iran Clashes Drag Gold to Weekly Low
Gold prices fell on Wednesday (June 3) after renewed clashes in the Middle East cast further doubt on the prospects for a US-Iran peace deal, keeping energy prices high and heightening inflation concerns. Bullion briefly fell as much as 1.4% to below US$4,430/oz, its lowest level in almost a week.
The latest escalation came after the US and Iran clashed again overnight, with Kuwait and Bahrain also affected in one of the most serious flare-ups since a ceasefire took effect in early April. Meanwhile, oil prices rose for a third straight day, while robust US labor market data has led markets to reconsider a tighter interest rate scenario.
The combination of expensive oil and a resilient US economy has reinforced expectations that the Fed could maintain its hawkish stance, even opening the door to further interest rate hikes. High interest rates are typically negative for gold because it offers no yield, and a strengthening dollar has added to the pressure.
Since the conflict broke out in late February, gold has largely moved in the opposite direction to oil. Despite falling sharply at the start of the war and remaining around 15% below pre-conflict levels, gold has recently been moving within a narrow range, but with a pattern of lower highs indicating that underlying sentiment remains fragile.
Prolonged disruptions to energy flows through the Strait of Hormuz are a key channel linking gold, oil, and interest rates: the longer supply is disrupted, the greater the risk of global inflation, and the stronger the case for central banks to hold or raise interest rates.
At 11:41 a.m. New York time, spot gold fell 1.1% to US$4,439.70/oz. Silver fell 2.3% to US$73.3623, while platinum and palladium also weakened. The Bloomberg Dollar Index rose 0.2%. (arl)*
Source: Newsmaker.id
