Gold Falls Nearly 2%, Dollar and Inflation Risks Weigh
Gold prices fell sharply on Tuesday (May 19), pressured by a strengthening US dollar and renewed inflation concerns amid uncertainty over US-Iran peace negotiations. At 9:36 a.m. ET, spot gold fell 1.9% to US$4,479.56 per ounce, while gold futures fell 1.6% to US$4,485.26.
Markets still view Washington-Tehran talks as deadlocked, although the fragile ceasefire has now held longer than the initial phase of fighting since the joint US-Israeli offensive in late February. This uncertainty has restored support for the dollar as a defensive asset, driven by the view that the US economy, as an energy exporter, is relatively better protected from the surge in oil prices caused by war.
The strengthening dollar has also weighed on gold by making the precious metal more expensive for buyers outside the US. At the same time, oil prices have fallen slightly but remain well above pre-war levels, while government bond yields have stabilized after a sharp sell-off in recent days.
The root of inflation concerns remains tied to the effectively closed Strait of Hormuz—a vital waterway off Iran's southern coast through which about a fifth of the world's oil supply normally passes. The risk of an energy shock is seen as prolonging inflation and prompting the central bank to maintain high interest rates or even tighten them further, conditions that are typically unsupportive of non-yielding assets like gold.
On the diplomatic front, Iranian state media reported that Tehran presented a peace proposal that includes a cessation of hostilities on all fronts (including Lebanon) and demands for reparations, as well as demands for sanctions relief, the release of funds, and an end to the blockade of Iranian ports. Reuters reported that Pakistan had submitted the proposal to the US, but the latest offer was seen as little different from the previous terms rejected by President Donald Trump last week. Trump said on Monday he had called off new strikes at the request of three Gulf leaders and claimed "serious negotiations" were underway—but the market is still waiting for evidence of progress that would truly change the energy and inflation risks. (arl)*
Source: Newsmaker.id
