Gold Strengthens: A Trap or a New Trend?
Gold prices continued their rise on Tuesday (May 19), buoyed by hopes that US-Iran diplomacy could ease inflationary pressures that have recently weighed on the precious metal. Gold strengthened even though the market remained wary of the risk of a new escalation in the Middle East.
Gold rose 0.4% to trade around US$4,585 per ounce after closing the previous session up 0.6%. At 7:18 a.m. Singapore time, spot gold was at US$4,584.50 per ounce.
US President Donald Trump said he authorized a new wave of attacks on Iran this week, but held off after three Gulf allies requested more time for nuclear deal negotiations. Trump said the leaders of Qatar, Saudi Arabia, and the United Arab Emirates requested a delay because they believed they could push for a deal that met US demands.
However, the negotiation process remains fragile. Axios (US media) reported that a proposal submitted by Iran through Pakistani mediators on Sunday was deemed to show no significant improvement, confirming that the chances of de-escalation are not yet fully solidified.
In terms of market transmission, Treasury yields held near multi-year highs, while persistently high energy prices continued to fuel inflation concerns. The combination of high yields and persistently tight interest rates typically limits gold's gains, as the precious metal offers no yield.
Gold has also remained within a narrow range since falling sharply in the early stages of the war and is now down more than 13% since the conflict began. OCBC believes Middle East dynamics, oil prices, and yields could still weigh on gold in the short term, but it still views gold as a hedge against global uncertainty. Silver rose 1.2% to US$78.68, while the Bloomberg Dollar Spot Index edged lower after falling 0.3% in the previous session.
Brent oil fell to $109 per barrel after confirmation that the US had withstood the attack, easing inflation concerns, weakening the dollar and strengthening gold.
5 key points:
- Gold attempted a 0.4% recovery; spot at US$4,584.50 (07:18 Singapore).
- Hopes of a US-Iran ceasefire eased some inflation concerns.
- Trump held off on new attacks after Qatar, Saudi Arabia, and the UAE requested time for negotiations.
- Ayu from Newsmaker added that the market is currently viewing oil as the main trigger; when oil falls, the dollar weakens due to inflation and interest rate expectations, and gold then responds by rising, as it is now. (asd)*
Source: Newsmaker.id
