Gold Prices Head for Weekly Weakness, Fed's Hawkish Signals a Major Pressure
Gold prices weakened and are poised for a third consecutive weekly decline. Pressure on gold stems from the Federal Reserve's hawkish stance, which has re-raised expectations of an interest rate hike this year. This sentiment has even overshadowed the positive impact of the signing of an interim peace agreement between the United States and Iran.
On Friday (June 19th), gold prices fell by 2.1% to around US$4,122 per ounce. This decline occurred after new Federal Reserve Chairman Kevin Warsh struck a tighter policy tone last Wednesday. This statement raised speculation that the US central bank still has the potential to raise interest rates. This situation weighed on gold as the precious metal does not yield interest.
Meanwhile, commercial shipping activity began to resume through the Strait of Hormuz after the United States declared the end of its blockade in the region. The reopening of this vital waterway eased market concerns about the risk of prolonged energy shortages. However, inflationary pressures have not completely dissipated, as analysts estimate that oil and liquefied natural gas shipments through the Strait of Hormuz will take months, or even longer, to return to normal.
Christopher Wong, a strategist at Oversea-Chinese Banking Corp., believes that the reopening of the Strait of Hormuz is actually a positive sentiment for gold. However, the impact is tempered by expectations of the Fed's policy tightening. He explained that gold historically tends to weaken ahead of the first interest rate hike. However, there is still room for recovery if the rate hike is merely anticipatory, not the start of a longer rate hike cycle.
As of 2:25 p.m. Singapore time, gold prices had fallen 1.6% to US$4,144.58 per ounce. Other precious metals also weakened, with silver falling 2.4% to US$64.1235 per ounce, while platinum and palladium also declined. Meanwhile, the Bloomberg Dollar Spot Index strengthened 0.1%, recording a 0.9% gain for the week. The strengthening US dollar also adds pressure on gold by making the commodity more expensive for holders of other currencies. (asd)
Source: Newsmaker.id
