Conflict Escalates, Gold Falls: Focus Shifts to Energy Inflation
Gold traded in a tug-of-war on Thursday (June 4) in Asian trading, dragged down by growing expectations that central banks may need to raise interest rates to curb inflationary pressures triggered by surging energy prices due to conflicts in the Middle East.
On the spot market, gold traded around US$4,460 per ounce. On a weekly basis, prices fell nearly 2%, reflecting the dominance of interest rate sentiment over support from hedge assets.
Inflation concerns intensified amid the prolonged conflict and the near-halt in activity in the Strait of Hormuz, a vital energy distribution route. Remaining expensive energy is seen as potentially adding to price pressures and strengthening the narrative of tighter monetary policy.
On the geopolitical front, hopes for a peace deal dimmed after the US and Iran exchanged attacks, with Bahrain and Kuwait also affected in the most serious escalation since a ceasefire took effect in early April. Despite the rising tensions, the market appears to be placing greater emphasis on inflation risks and the response of interest rates to gold's movements.
In the US, Cleveland Fed President Beth Hammack said the Fed could be forced to raise interest rates in the near future if inflationary pressures continue to strengthen. Investors are now awaiting the release of the nonfarm payrolls (NFP) on Friday to gauge the Fed's next policy direction.
5 key points:
- Gold is under pressure as the market raises expectations for interest rate hikes to curb energy inflation.
- Gold prices are around US$4,460/ounce and have fallen nearly 2% over the week.
- Rising energy prices related to the conflict and disruptions in the Strait of Hormuz are reinforcing inflation concerns.
- The US-Iran escalation adds geopolitical risks, but the market's focus remains on inflation channels and policy.
- Comments from Fed officials and Friday's NFP data are key indicators of interest rate expectations. (asd)*
Source: Newsmaker.id
