Gold Plunges 2%, Yields and Dollar Rise Amid Iran Inflation Risks
Gold prices (XAU/USD) fell more than 2.3% on Friday (May 15), pressured by concerns that a protracted US-Iran conflict could trigger further inflation and force central banks to maintain a tighter stance for longer. XAU/USD traded below $4,550 after briefly touching a daily low of around US$4,511.
The main pressure came from surging US bond yields and a strengthening dollar. The 10-year US Treasury yield rose to 4.591% (up about 10 bps) and approached its 2025 high of 4.627%, while the DXY strengthened 0.33% to 99.19. The combination of higher yields and a stronger dollar typically reduces gold's appeal, as the precious metal offers no yield and is priced in dollars.
On the energy front, comments by US President Donald Trump suggesting his patience with Iran is wearing thin pushed up oil prices, adding to concerns about energy-based inflation. With the release of US inflation figures on Tuesday and Wednesday, which were deemed "hot," the market is increasingly skeptical about the chances of monetary policy easing in the near term—a headwind for gold, which tends to be stronger when interest rates are low.
Fed policy expectations remain tight. According to Prime Terminal, the market expects the Fed—in its first meeting under new Chairman Kevin Warsh—to hold interest rates in June and likely maintain them until the end of the year. Several Fed officials this week also emphasized that controlling inflation remains a priority, and some even did not rule out additional tightening if price pressures persist.
On the activity front, US industrial production rose 0.7% (MoM) in April, beating the 0.3% forecast and reversing the 0.3% decline in March. This data reinforces the narrative that the economy remains quite resilient, thus ensuring that policy remains focused on inflation risks, rather than supporting growth.
Next week's focus shifts to US housing and labor market data, as well as further comments from Fed officials. The market will also be monitoring whether the oil rally continues and how much impact it will have on inflation expectations—as this path will determine the direction of yields, the dollar, and the recovery potential of gold. (arl)*
Source: Newsmaker.id
