Gold prices fell slightly in Friday's session and are heading for a week of decline, as high crude oil prices increase concerns about inflation and the prospect of maintaining high interest rates for a long time, amid deadlock in peace talks between the US and Iran.
Spot gold prices fell 0.2% to 4,680.75 USD/ounce at 4:53 PM Vietnam time. Since the beginning of the week, this metal has fallen about 3% after four consecutive weeks of increase. US gold futures for June delivery fell 0.5% to 4,700.50 USD/ounce.
Brent oil prices have increased by about 17% this week, fluctuating above the level of 105 USD/barrel, as the Strait of Hormuz - a strategic transport route - is largely closed, despite the extension of the ceasefire with Iran.
Mr. Kelvin Wong - senior market analyst at OANDA, said that as long as the risk of prolonged closure in the Strait of Hormuz remains, oil prices will continue to remain high and put pressure on gold prices.
High oil prices can boost inflation by increasing transportation and production costs, thereby increasing the possibility of interest rates remaining high. Although gold is seen as an inflation hedging tool, high interest rates make profitable assets more attractive, reducing the attractiveness of this precious metal.
Gold is currently still'stuck' in the sideways zone, between the 50-day moving average around 4,900 USD and the bottom of the 20-day moving average around 4,645 USD," Mr. Wong said, while emphasizing that market developments currently largely depend on the Middle East situation.
Iran on Thursday showed its tight control over the Strait of Hormuz by publishing a video of special forces on a speedboat approaching a large cargo ship, after peace talks that Washington hoped to reopen this important shipping route broke down.
US President Donald Trump said he believes Tehran wants to reach an agreement, but the leadership is in turmoil. He also emphasized not to rush to reach an agreement, but if Iran does not want it, "I will resolve it by military means.
The USD has increased by 0.8% this week, making gold valued in greenbacks more expensive for investors holding other currencies.
The yield on 10-year US Treasury bonds increased by about 2% in the week, increasing the opportunity cost of holding gold - a non-performing asset.
On the precious metals market, spot silver prices fell 1% to $74.64/ounce, platinum fell 1.4% to $1,977.47/ounce, while palladium remained unchanged at $1,468.18/ounce.
