Gold Steady, US-Iran Tensions Raise Inflation Risks Again!
Gold prices tended to stabilize in the Asian session on Friday (May 8th) after optimism about the possibility of a deal to reopen the Strait of Hormuz faded. The market again faced geopolitical uncertainty following reports of an attack on a US Navy ship in the region.
Spot gold was trading around $4,708 per ounce, up 0.3% at 7:24 a.m. in Singapore, after closing slightly lower in the previous session. On a weekly basis, gold rose 1.8%.
The escalation occurred after the US attacked military targets in Iran, following Iran's reported firing on three destroyers passing through the Strait of Hormuz. This development dimmed market hopes for a deal that had previously buoyed sentiment, while the US is reportedly awaiting Iran's response to its proposal to reopen the waterway, which is crucial for energy flows.
On the fundamental side, narratives of war and energy disruptions continue to raise concerns that inflationary pressures could persist for longer. In this context, expectations of higher interest rates and a strengthening US dollar tend to be a drag on gold, as it offers no interest yield and is denominated in dollars.
Since the conflict erupted, gold is said to have fallen around 11%, amid concerns that surging energy prices could potentially reinforce the "higher interest rates for longer" view. The Bloomberg Dollar Index rose 0.1% on the day, although it was still down 0.2% for the week.
The market now awaits the release of US nonfarm payrolls data, scheduled for Friday, to gauge the next direction in interest rates, amid comments from some Fed officials dampening the chances of a return to policy easing as the war adds to uncertainty. Market participants will be monitoring developments in the Strait of Hormuz, dollar movements, and Fed policy signals reflected in employment data. (asd)
Source: Newsmaker.id
