Gold Falls as US-Iran Deal Uncertainty Looms
Gold prices weakened at the start of the week, affected by uncertainty over the progress of a peace agreement between the US and Iran that could potentially reopen the Strait of Hormuz and ease global inflation concerns. Spot gold bullion fell 1% to $4,494.91 per ounce in London, after rising 1% last Friday as optimism for a deal grew. Over the weekend, both sides returned to tensions, demanding revisions to the draft agreement.
Oil prices surged from a six-week low on Monday, reflecting fading hopes for a quick resolution to the conflict. The surge in energy prices raised the risk of higher inflation and dampened the prospect of interest rate cuts, weighing on non-yielding gold. Higher borrowing costs are a major drag on the precious metal.
Federal Reserve Vice Chair for Supervision Michelle Bowman emphasized that it is too early to assess the impact of the Iran war on inflation. Policymakers need to account for temporary price fluctuations and assess longer-term risks that could impact monetary stability.
According to analyst Hebe Chen of Vantage Markets, "Gold is caught between demand as a safe haven asset due to geopolitical uncertainty and pressure on real yields that are sensitive to Fed policy." He added that gold prices are likely to remain range-bound until the geopolitical fog clears or escalates, with inflation being the determining factor for future movements.
Besides gold, other metals showed mixed movements: silver rose 0.3% to $75.50 per ounce, platinum strengthened slightly, while palladium fell. The Bloomberg Dollar Spot Exchange Index edged up 0.1%, indicating that the US dollar remains a safe haven for investors amid energy market and geopolitical uncertainty. (gn)
Source: Newsmaker.id
