Gold Plunges Ahead of European Session!
Gold prices weakened and headed for a modest weekly decline, as a war-fueled surge in US inflation reinforced expectations of prolonged high interest rates. Bullion briefly fell to around US$4,607 per ounce, down around 2% since last Friday.
The main pressure came from renewed strength in US inflation data. April wholesale inflation (PPI) rose to its fastest pace since 2022, while consumer price inflation (CPI) recorded its largest increase since 2023. A strengthening dollar and a surge in 10-year Treasury yields are a combination that is usually negative for gold, as gold offers no yield and is priced in dollars.
On the geopolitical front, the Strait of Hormuz remains effectively closed while efforts to end the Iran war remain stagnant, prolonging the energy crisis and keeping inflation concerns high. Oil prices are also on track for weekly gains, with WTI approaching US$102 per barrel on Friday, strengthening the energy-driven inflation channel that is adding pressure on monetary policy expectations.
ANZ believes inflation expectations, higher yields, and a stronger dollar have the potential to keep gold under pressure in the near term. The bank also postponed its US$6,000/ounce target to mid-2027 from early next year. Since the sharp decline at the start of the war, gold has tended to move within a narrow range as the market weighs the risk of inflation restraining the opportunity for easing versus the risk to growth if the conflict drags on; cumulatively, gold has fallen more than 12% since the war began.
Despite gold's recent performance, TD Securities believes hedge funds have the potential to increase exposure, with price scenarios still favorable for the accumulation of commodity trading advisors (CTAs) positions in various price path simulations. Meanwhile, India has further tightened gold import regulations to defend the rupee, days after raising import duties, which could weigh on demand sentiment in the world's second-largest bullion market.
At 12:44 p.m. Singapore time, spot gold fell 1% to US$4,605.16 per ounce. Silver fell 2.9% to US$81.09, although it is still up about 11% throughout May. ANZ assesses that the silver rally is vulnerable in the near term, but the market deficit and structural demand remain supportive in the medium to long term. Platinum and palladium also weakened, while the Bloomberg Dollar Spot Index rose 0.2% and strengthened 0.9% over the week.
5 Key Points
- Gold is headed for a weekly decline; spot fell 1% to US$4,605.16 (12:44 Singapore), around -2% since last Friday.
- US inflation is strengthening: April's PPI was the fastest since 2022 and the CPI was the largest since 2023, pushing the dollar and yields higher, pressuring gold.
- The energy crisis continues as Hormuz is effectively closed; WTI is approaching US$102, supporting energy-based inflation risks.
- ANZ: Gold may remain under pressure in the near term; US$6,000 target postponed to mid-2027; gold is down >12% since the war.
- TD Securities sees potential for position accumulation (CTA) while India tightens imports; Silver fell 2.9% that day, though it still rose 11% in May. (asd)*
Source: Newsmaker.id
