Beware: Gold's Rise Remains Fragile!
Gold prices attempted to recover at the start of the week after falling to the US$3,983–US$3,982 per troy ounce range during Monday's Asian session (July 20th). The weakening US dollar was one factor supporting gold's rise, as this commodity typically becomes more attractive when the greenback weakens.
However, gold's recovery remains fragile. Pressure from expectations of high Fed interest rates remains a major drag, given that gold does not provide a yield like bonds or other interest-bearing instruments.
Geopolitically, US-Iran tensions have again become a market concern. The United States reportedly resumed attacks on Iran, while Iran retaliated with ballistic missiles and drones targeting several US allies in the Middle East.
The risk of a broader war has kept the market factored in a geopolitical risk premium. Furthermore, the US naval blockade of Iranian ports and restrictions on shipping traffic in the Strait of Hormuz have pushed crude oil prices to their highest level since June 12th.
Rising oil prices pose a problem for gold as they could reignite inflation concerns. If energy inflation rises, the Fed could potentially maintain its tighter stance for longer, even opening the door to interest rate hikes.
As a result, gold could still draw support from a weakening dollar and geopolitical tensions. However, further gains appear limited as long as oil prices remain high, inflation remains a threat, and Fed officials continue to signal hawkish sentiment. Technically, gold needs to sustainably break through the channel resistance area to open up the opportunity for stronger gains. (asd)*
Source: Newsmaker.id
