Gold prices fell as investors continued to assess the interest rate outlook of the US Federal Reserve (Fed) after a series of US economic data this week showed increased inflation under the impact of the Iranian conflict.
In Thursday's trading session, gold prices at one point fell nearly 1%, below the 4,650 USD/ounce mark after previously increasing by about 0.6%.
The gold market is currently still fluctuating in a narrow range since its sharp decline in the early stages of the conflict in Iran, as investors are constantly considering the risk of prolonged inflation causing interest rates to remain high and the possibility of weakening economic growth that may force central banks to ease monetary policy.
Low interest rates are often beneficial for gold because this precious metal does not generate profits.
Mr. Nicholas Frappell - Global Organization Market Director at ABC Refinery said that the market is currently focusing on monitoring the possibility of the Middle East conflict cooling down as well as the possibility of the Hormuz Strait being fully reopened.
According to him, gold could be supported if the USD weakens and central banks slow down the pace of monetary policy tightening in the event that transportation through Hormuz returns to normal.
Meanwhile, India continues to tighten gold import regulations as Prime Minister Narendra Modi promotes measures to support the Rupee amid the prolonged Middle East conflict.
The new changes only apply to the amount of gold imported under tax exemption for re-export activities. This mechanism allows jewelry manufacturing and trading enterprises to import gold with tax exemption provided that the product is then re-exported.
However, analysts believe that the amount of gold in the above category only accounts for a relatively small proportion of India's total gold demand - the world's second largest gold consumer.
Meanwhile, silver prices continue to attract attention as they have increased by about 13% since the beginning of May.
Ms. Nicky Shiels – Head of Metal Research and Strategy at MKS PAMP SA believes that the increase in silver mainly comes from speculation in a lower liquidity environment, which are fundamental factors.
According to her, the recent sharp increase in copper prices and concerns about supply have contributed to supporting silver prices to rise. Silver, zinc and copper are currently signaling quite strong price increases as speculative cash flow continues to increase in the market.
