Gold prices fell slightly in the latest trading session as the market continued to monitor developments related to the ceasefire between the US and Iran.
This precious metal fluctuated between up and down before falling back to trading around the 4,500 USD/ounce mark.
US bond yields continue to remain near highs for many years as energy prices remain high, raising concerns about inflation in the market. Higher interest rates often put pressure on gold because this precious metal does not generate profits.
Meanwhile, the USD strength index increased by about 0.2%, making gold more expensive for many investors holding other currencies.
US President Donald Trump said on Monday that he had approved a plan to launch more attacks on Iran this week, but temporarily postponed it after leaders of Qatar, Saudi Arabia and the UAE asked Washington to spend more time on diplomatic efforts.
According to analysts, gold is currently under pressure as the Iran conflict pushes oil prices up, thereby increasing concerns about inflation and strengthening expectations that the US Federal Reserve (Fed) will maintain a more cautious monetary policy.
More optimistic US housing data than expected also contributes to supporting the view that the world's largest economy can avoid the risk of recession in the short term. This partly reduces the need for defense against gold – an asset that often benefits in an unstable economic environment.
The gold market is currently continuing to fluctuate in a narrow range since the sharp decline in the early stages of the Middle East conflict. Concerns about inflation due to rising oil prices once put great pressure on gold, but at the same time, the market also has expectations that central banks may have to ease monetary policy if economic growth weakens.
Since the conflict broke out, gold prices have now decreased by nearly 14%.
Mr. Vasu Menon - Strategy at Oversea-Chinese Banking Corp - believes that developments in the Middle East along with fluctuations in oil prices and bond yields may still continue to affect gold in the short term.
However, he still assesses gold as a useful defense tool against global economic and geopolitical instability in the long term.
