Dollar Strengthens, Gold Under Pressure Again!
Gold is likely to post its first weekly decline in more than a month, after a strengthening US dollar and rising US bond yields dampened the appeal of the non-yielding asset. The geopolitical risk premium from the Middle East war has not been enough to offset the pressure on the macro front.
Bullion ended the previous session with a weekly decline of around 3.7% before stabilizing in early trading on Friday. The dollar index rose 1.4% this week, its largest gain since November 2024, while US Treasury prices fell for a fourth straight day, pushing yields to multi-week highs.
Spiking tensions between the US-Israel war with Iran have also boosted oil prices and led market participants to cut expectations for a Fed interest rate cut. The swap market is now pricing in only 34 basis points of interest rate cuts by the end of the year, down sharply from around 60 basis points at the end of last week. The combination of a stronger dollar and higher borrowing costs is generally negative for gold.
On the geopolitical front, global markets remain cautious as the conflict continues into its seventh day. Iran reported launching missile and drone attacks on the Gulf region on Thursday night, including on oil refineries in Bahrain, while Israel continued airstrikes on Tehran and the US suspended operations at its embassy in Kuwait. The risk of energy supply disruptions also increased with attacks on energy infrastructure and the effective closure of the Strait of Hormuz to shipping, pushing oil toward its biggest weekly gain since 2022.
Additional pressure came from broader financial market dynamics. The sharp decline in equities this week has led some investors to use gold as a source of liquidity, making its movements more susceptible to stock market volatility. At the same time, concerns arose after rumors circulated that some central banks could release some gold reserves, including talk from the Polish central bank of selling reserves to fund intensive spending.
On Friday morning in Asia, spot gold prices edged up 0.2% to $5,101.32 per troy ounce (8:22 a.m. Singapore time). Silver gained 1.3% to $83.30, while platinum and palladium also rose. Although momentum has slowed in recent days, gold has still recorded a gain of around 18% year-to-date, ahead of global trade and geopolitical factors. (asd)
Source: Newsmaker.id
