Risk of Escalation Heats Up, Gold Gains Slightly
Gold prices (XAU/USD) rose moderately by around 0.30% on Monday (May 11) after efforts to resolve the conflict between the United States and Iran reached another stalemate. The precious metal traded around US$4,726, after briefly touching a daily low of US$4,648 before rebounding.
The increase occurred amid escalating geopolitical tensions after President Donald Trump rejected Tehran's latest peace proposal, calling it "totally unacceptable." Iran's proposal demanded compensation for war damage, control of the Strait of Hormuz, the release of frozen funds, and an end to the US naval blockade. However, the proposal did not include the handover of its nuclear stockpile to the US—Washington's main demand.
Axios reported that Trump held a meeting with the National Security Council to evaluate the possibility of resuming military action. Speculation of an escalation in the conflict pushed US crude oil prices up by around 3.60%, with WTI hovering around US$98 per barrel. The US Dollar Index also strengthened slightly, reflecting the risk-off sentiment in global markets.
Despite both the dollar and oil rising, gold maintained its strength, indicating that hedging demand remains solid amid geopolitical uncertainty.
In terms of economic data, sales of existing homes in the US showed a slight increase in April. However, the market's primary focus is on the release of inflation data this week, including the Consumer Price Index and the Producer Price Index, which are considered crucial for the direction of the Federal Reserve's monetary policy.
Meanwhile, Morgan Stanley stated that it does not expect the Fed to cut interest rates next year. This view is in line with money market expectations that the US central bank will likely keep rates steady for longer.
With the combination of rising geopolitical risks and the prospect of prolonged high interest rates, gold's movement is expected to remain sensitive to diplomatic developments in the Middle East and key US economic data in the coming days. (Arl)*
Source: Newsmaker.id
