Gold Caution Ahead of CPI
Gold prices have stabilized after experiencing pressure for two consecutive days. Gold is trading around US$4,020 per troy ounce after falling 2.9% on Monday. The main pressure comes from the escalating Middle East conflict and the increasing likelihood of a Fed interest rate hike.
Tensions escalated after President Donald Trump reimposed a blockade on Iran and demanded a 20% reimbursement of other cargoes passing through the Strait of Hormuz. Meanwhile, the United States and Iran are continuing to trade attacks, fueling renewed energy market volatility.
Surging European oil and natural gas prices have raised investor concerns about a possible rebound in inflation. If energy prices remain high, the Fed could potentially keep interest rates high for longer or even raise them again. This puts a strain on gold because it does not provide the same yield as bonds.
Pressure increased after Fed Governor Christopher Waller said interest rates may need to be raised in the near future if core inflation continues to show broad price pressures. The probability of a 25 basis point interest rate hike this month has even risen to around 50%, from less than 10% previously.
The market is now awaiting two important events: US consumer inflation data for June and Kevin Warsh's first testimony before Congress as Fed Chair. If inflation data trumps or Warsh sounds hawkish, gold could come under further pressure. However, if inflation begins to ease, gold has a chance of holding above the US$4,000 level.
In midday trading in Singapore, spot gold recovered 0.5% to US$4,021.82 per troy ounce after weakening earlier in the session. Silver edged up to US$57.70 per ounce, while platinum and palladium also strengthened. Although macroeconomic pressures remain significant, some analysts believe the US$4,000 level is starting to become a new floor for gold, especially if Asian investors resume accumulation. (asd)*
Source: Newsmaker.id
