Gold Prices Drop, Here's Why!
Gold prices weakened on Tuesday (June 23rd) after inflation concerns once again dominated market sentiment. The precious metal briefly fell to nearly US$4,115 per troy ounce, erasing the slight gains seen in the previous session. This pressure arose because the market believed the ongoing conflict in the Middle East still had the potential to push energy prices higher and keep inflation high.
These concerns have led investors to reconsider the possibility of central bank interest rate hikes. Federal Reserve Bank of Chicago President Austan Goolsbee expressed concern that inflation remains well above target and is moving in an unfavorable direction. The hawkish stance of Fed Chairman Kevin Warsh also reinforced the view that the US central bank will not ease policy anytime soon.
The strengthening US dollar has also added pressure on gold. Since the Fed's last meeting, the dollar has risen more than 1%, making gold more expensive for holders of other currencies. Deutsche Bank believes that changing expectations regarding Fed policy, coupled with still-strong US economic data, are the main factors pressuring gold prices. The bank also cut its gold price forecast to US$4,300 per troy ounce for the third quarter and US$4,800 by year-end.
Pressure on gold was also evident in other metals markets. Silver fell sharply to around US$62.72 per troy ounce, while platinum and palladium each weakened more than 2%. Investors are now awaiting the release of US Personal Consumption Expenditures (PCE) data on Thursday. This data is the Fed's favorite inflation indicator and will be crucial in determining whether the market is increasingly convinced of the direction of high interest rates.
However, gold still received some support from developments in peace talks between the United States and Iran. US Vice President JD Vance said talks with Tehran were going very well, while Iranian officials also reported progress. However, the market believes significant obstacles remain, so optimism about peace is not strong enough to overcome pressures from inflation, the US dollar, and expectations of high interest rates. For now, gold is expected to remain in the US$4,000 to US$4,300 range until new data is released that can change the market direction. (asd)*
Source: Newsmaker.id
