Gold Falls 4%, What's Behind This Pressure?
Gold prices fell sharply on Wednesday (June 10), pressured by a strengthening US dollar, weakening riskier stocks, and a new escalation between the United States and Iran. Spot gold weakened 4.4% to US$4,071.40/oz, while gold futures fell 4.5% to US$4,095.00/oz.
The pressure arose after hopes for a Middle East peace deal waned again. The US military launched a "self-defense" strike against Iran after President Donald Trump stated that Washington would respond to the downing of a US helicopter previously reported to be patrolling the Strait of Hormuz. Iran has not yet claimed responsibility for the incident.
Trump's comments further heightened uncertainty. He said Iran was taking too long to negotiate a deal and "must pay a price." This statement made the market view the chances of a stable ceasefire as increasingly difficult, especially after Trump reiterated that the US was prepared to strike Iran harder if the deal process did not move quickly.
For gold, this geopolitical conflict does not automatically translate into a safe haven. The market is instead more focused on the impact of energy and inflation. The closure of the Strait of Hormuz remains a source of concern as this route is crucial for global oil shipments. If oil prices continue to rise, inflation could remain high and make it more difficult for the Fed to ease policy.
US CPI data for May provided mixed signals. Headline inflation rose 0.5% month-on-month and 4.2% year-on-year, in line with expectations, but at the highest annual rate since April 2023. Core CPI rose 0.2% month-on-month and 2.9% year-on-year, slightly softer than the monthly estimate. However, more than half of the increase in headline inflation came from energy, with energy prices rising 23.5% year-on-year and gasoline prices soaring 40.5% year-on-year.
Fundamentally, pressure on gold comes from a combination of a stronger dollar, energy inflation risks, and Fed rate uncertainty. While the more benign core CPI data has partially dampened expectations of a rate hike, the energy spike caused by the conflict keeps inflation risks alive. High interest rates typically weigh on gold because the metal does not pay interest or dividends.
For now, gold remains in a defensive phase. The market will monitor developments in the US-Iran conflict, shipping flows through the Strait of Hormuz, the direction of oil prices, the movement of the US dollar, and changes in market expectations regarding the Fed's policy following the latest inflation data. (Arl)*
Source: Newsmaker.id
