Gold Holds Steady as Markets Weigh Fed Rate Outlook Amid US-Iran Conflict
Gold prices traded relatively steady after an escalation in clashes between the United States and Iran over the weekend was followed by reports of mediation efforts. Investors are now assessing the possibility that the Federal Reserve may raise interest rates again to contain inflationary pressures.
Gold was trading near US$4,000 per troy ounce after falling about 2.5% last week. Oil prices edged lower after Iran’s Foreign Ministry said Tehran had received several proposals from mediators regarding the conflict with the US, although no further details were disclosed.
The Iran conflict, now entering its fifth month, has once again pushed up the prices of commodities used in manufacturing and food production. This has left investors weighing the impact of higher energy costs and renewed inflation risks against weaker US economic data.
Expectations of higher interest rates remain a key factor limiting gold’s upside. Higher rates tend to lift bond yields and borrowing costs, reducing the appeal of gold because the precious metal does not generate interest income.
Justin Lin, an analyst at Global X ETFs, said gold’s reaction to the recent surge in oil prices had been relatively muted. According to him, this may reflect growing investor fatigue toward geopolitical risks and a stronger focus on the Federal Reserve’s next policy decision.
“Bond yields only moved slightly higher over the weekend despite the significant escalation in the Middle East. That is likely one reason why gold prices have remained relatively stable,” Lin said.
Swap traders currently see only a low probability of a Fed rate hike at its July meeting. However, markets have fully priced in at least one rate increase by the end of the year.
As of 2:20 p.m. in New York, spot gold was down 0.2% at US$4,008.05 per troy ounce. Silver and palladium rose more than 1.5%, while platinum posted a modest gain. The Bloomberg Dollar Spot Index, which tracks the performance of the US currency, was little changed.
In industrial metals trading, copper gained 0.7% to settle at US$13,622 per metric ton on the London Metal Exchange. Other LME metals, including zinc, nickel, and lead, moved slightly lower.
Source : Newsmaker.id
