Gold Struggles to Recover, Dollar Remains Strong
Gold prices struggled to continue their recovery during the Asian session, despite briefly rising slightly from a more than one-month low. XAU/USD remained near the US$4,500 per ounce area, with the main pressure coming from a strengthening US dollar and growing expectations that the Fed could return to a hawkish stance.
Fundamentally, US-Iran tensions remain a major factor influencing the market. However, this time the conflict is not entirely beneficial for gold. The escalation in the Persian Gulf has actually pushed oil prices higher, sparking renewed inflation concerns, and making the market reconsider the possibility of higher interest rates remaining in place for longer.
The ceasefire between the US and Iran now appears increasingly fragile following an escalation in violence around the Strait of Hormuz. The United Arab Emirates and South Korea reported attacks on ships in the vital waterway. The UAE also reported a fire at the Fujairah oil port following an Iranian missile and drone attack.
US President Donald Trump warned Iran against attacking American ships escorting shipping through the Strait of Hormuz under his new initiative, Project Freedom. This strong statement increases the risk of escalation and maintains high geopolitical uncertainty.
While geopolitical conflicts typically support gold as a safe haven asset, the current situation is different because the market is more focused on the inflationary impact of surging energy prices. The likelihood of a Fed rate hike by the end of the year is said to have increased sharply, thus supporting US bond yields and the dollar. This puts pressure on gold, as it does not provide a yield.
In terms of outlook, gold remains vulnerable as long as the US dollar and US yields remain strong. Gold price gains are potentially limited and vulnerable to further selling if there is no strong buying impetus. Market participants need to wait for clearer confirmation of a recovery before judging that gold has formed a price floor.
5 Key Points:
- Gold remains near the US$4,500 level, the lowest level in more than a month.
- The strong US dollar and yields are holding back the recovery in gold prices.
- The US-Iran conflict has triggered a surge in oil prices, increasing the risk of inflation.
- Expectations of a hawkish Fed stance are rising, putting pressure on non-yielding gold.
- Gold's gains remain vulnerable to selling, as long as there is no confirmation of a strong recovery. (asd)*
Source: Newsmaker.id
