Gold Falls Amid Hormuz Turmoil, Market Focuses on Inflation Risks!
Gold prices weakened after weekend escalation in Middle Eastern waters, rekindling concerns about energy supply shocks and their potential inflationary risks. Bullion briefly fell as much as 1.9% before paring losses to settle around $4,790 per ounce.
Sentiment was weighed down by developments in the Strait of Hormuz after President Donald Trump said the U.S. Navy fired on and seized an Iranian-flagged cargo ship, while Tehran warned that approaching ships would be considered a ceasefire violation. Several ships reportedly canceled crossings despite Iran's earlier statement that the passage was reopened.
Surging oil and natural gas prices are a major transmission channel to the gold market. Rising energy prices have the potential to spill over into the core inflation measure monitored by the Federal Reserve, dampening the chances of interest rate cuts; expectations of higher borrowing costs typically reduce the appeal of gold, as it does not yield interest.
Geopolitically, the latest incident is also seen as disrupting the prospects for peace talks ahead of the 14-day ceasefire ending on Tuesday. OCBC analyst Christopher Wong believes the selling pressure reflects weakening risk sentiment, but the market still sees both sides attempting to strengthen their bargaining positions ahead of the next meeting, so the short-term direction remains determined by broader risk sentiment.
The market now awaits the US Senate confirmation hearing for Kevin Warsh on Tuesday as Trump's pick to lead the Fed. Hints of potential policy easing could support gold, while the emphasis on inflation caution is likely to be a drag. At the last update, spot gold fell 0.8% to $4,792.04 (10:48 a.m. London), while the dollar strengthened slightly and silver also weakened. (asd)*
Source: Newsmaker.id
