Gold and silver prices simultaneously plummeted in Friday's trading session as inflation in the US rose sharply under the impact of the Iranian conflict, increasing expectations that the US Federal Reserve (Fed) will maintain high interest rates for longer.
As of 7:42 AM on May 16 (Vietnam time), spot gold prices fell 2.93% to 4,540.9 USD/ounce - the lowest level since May 6. Overall for the week, this precious metal has lost more than 3%.
US gold futures for June delivery also fell sharply by 2.2%, to 4,582.60 USD/ounce.
Meanwhile, silver prices reversed and plummeted after a hot increase at the beginning of the week. At one point, silver lost nearly 7% when speculators strongly closed profits after a strong increase brought prices close to the 90 USD/ounce mark. By 7:45 AM, spot silver prices fell by about 9%, falling back to around 75.97 USD/ounce.
Pressure on the precious metals market increased as US Treasury bond yields simultaneously rose. 2-year term bond yields rose to their highest level in 14 months, while 10-year term yields approached their near-a-year peak.
The USD also continued to strengthen, with the Bloomberg Dollar Spot Index increasing by about 1% in the week, making gold and silver more expensive for investors holding other currencies.
Newly released economic data shows that inflation in the US continues to rise sharply. The producer price index (PPI) in April recorded the largest increase since 2022, while the consumer price index (CPI) increased the strongest since 2023.
According to analysts, rising energy costs are spreading to many commodity and service groups, further weakening expectations of the Fed's early interest rate cut.
Mr. Tim Waterer – Head of Market Analysis at KCM Trade believes that the rebound in oil prices is making inflation the focus of the market.
Rising oil prices have pulled yields and the USD up, while expectations of the Fed's early interest rate cut continue to weaken. This puts great pressure on gold," he said.
According to CME Group's FedWatch tool, the market is currently almost no longer betting on the possibility of the Fed cutting interest rates this year, and assesses the probability of the Fed raising interest rates before December at around 39%.
Meanwhile, the Hormuz Strait – the world's vital energy transport route – is still almost closed due to unclear progress in efforts to end the Iranian conflict.
This development continues to prolong the energy crisis and maintain global inflationary pressure. Brent oil prices are currently up about 6.2% in the week and hovering above the 106 USD/barrel mark, while WTI oil is approaching 103 USD/barrel.
Since the US-Iran conflict broke out on February 28, gold prices have fallen by more than 13%.
Experts at ANZ Group Holdings believe that expectations of increased inflation, rising bond yields and a stronger USD may continue to put pressure on gold in the short term. ANZ also reversed its gold forecast of 6,000 USD/ounce to mid-2027 instead of early next year as before.
However, some experts still believe that gold may continue to attract investment capital.
Mr. Ryan McKay – senior commodity strategist at TD Securities said that trend trading (CTA) funds are likely to continue to increase their buying positions for gold in the coming sessions.
