Gold Slips, Iran Risks Remain
Gold prices weakened again on Tuesday (May 19th) as the US dollar strengthened, while markets remained anxiously awaiting the direction of US-Iran peace negotiations. At 6:08 a.m. ET, spot gold fell 0.6% to US$4,540.81 per ounce, while gold futures fell 0.3% to US$4,544.00.
Pressure came from a strengthening dollar, which has regained support as a defensive asset amid geopolitical uncertainty. A stronger dollar makes gold—priced in USD—more expensive for foreign buyers, curbing demand.
On the macro front, markets are still weighing the impact of the Iran war on inflation. The effectively closed Strait of Hormuz remains a major risk as this passage is a vital corridor for about a fifth of the world's oil supply. Concerns that an energy shock could prolong inflation keep markets sensitive to the high interest rate narrative.
Oil prices have weakened slightly, but remain well above pre-war levels. Government bond yields have also stabilized after a sharp selloff in recent days, but the risk of energy inflation continues to maintain expectations of tighter monetary policy—a typically less friendly environment for non-yielding assets like gold.
On the diplomatic front, Iranian state media reported that Tehran sent a peace proposal that includes a cessation of hostilities on all fronts (including Lebanon) and demands for reparations. IRNA said the proposal also demands the withdrawal of US troops from areas near Iran, the lifting of sanctions, the release of frozen funds, and an end to the US blockade of Iranian ports. Reuters reported that Pakistan has submitted the proposal to the US.
However, the chances of a breakthrough are still considered limited. The latest proposal is said to be not significantly different from the previous conditions, which President Donald Trump last week dismissed as "garbage." Trump said on Monday that he called off new attacks on Iran at the request of three Gulf leaders and claimed that "serious negotiations" were underway—while the market awaits concrete evidence that diplomacy can promote normalization of energy flows. (arl)*
Source: Newsmaker.id
