Gold Stagnates, War Inflation Weighs
Gold prices held steady on Monday (May 18), but remained under pressure after last week's sharp decline amidst the lack of progress in reopening the Strait of Hormuz. Inflation concerns have intensified as disruptions to energy flows from the Middle East persist, while global bond markets are under pressure.
Spot gold traded flat at US$4,541.24 per ounce at 11:00 a.m. London time, after falling nearly 4% last week. The US and Iran are said to remain far apart in talks to end the war and restore access to Hormuz, a vital waterway for global energy shipments.
Oil prices rose after US President Donald Trump renewed threats against Iran, heightening the risk of energy-driven inflation and increasing the likelihood of interest rates remaining high or rising. This inflation channel has also fueled a sell-off in global bonds, lifting yields as markets doubt that Middle East energy supplies will quickly return to normal—a condition that typically weighs on gold, as the precious metal offers no yield.
On the ground, Sunday's drone attack that sparked a fire at a nuclear plant in the United Arab Emirates highlighted the fragility of the US-Iran ceasefire. Since plunging in the early stages of the conflict, gold has moved within a relatively narrow range as investors weigh the inflation risks that curb the possibility of easing against the growth risks if the conflict drags on. Cumulatively, gold is said to be down about 14% since the conflict began.
JPMorgan believes renewed investment interest in precious metals has "dried to a trickle" due to concerns about higher interest rates, with a resolution to the conflict seen as key to restoring demand, although central bank purchases are seen as a potential support. On the Asian demand side, India's tighter import policies have weighed on sentiment, with gold imports slowing amid higher duties; India has also tightened silver import rules to defend its currency, which has fallen to a record low.
In other metals markets, silver fell 0.2% to US$75.79 an ounce after falling more than 5% last week. The Bloomberg Dollar Spot Index fell 0.1% on the day after rising 1.2% last week. This week, market focus will be on the minutes of the Fed's April meeting for clues on interest rates, as well as developments in US-Iran negotiations and shipping flows in Hormuz, which will determine the direction of oil prices, inflation, and safe-haven demand. (arl)*
Source: Newsmaker.id
