Gold prices fell in the first trading session of the week as new airstrikes between the US and Iran in the Persian Gulf region caused oil prices to rise again, while expectations that the US Federal Reserve (Fed) would continue to raise interest rates continued to put pressure on the precious metal.
As of 2:24 PM Vietnam time, spot gold prices fell 0.48% to 4,062.07 USD/ounce. US gold futures for August delivery also fell 0.6% to 4,072.20 USD/ounce. If this trend continues, gold will record its fourth consecutive month of decline with a decrease of about 10.5%.
Mr. Tim Waterer - Chief Market Analyst at KCM Trade - said that the new military developments between the US and Iran last weekend have increased concerns about inflation prospects and monetary policy.
Last weekend, the US and Iran continued to conduct military attacks on each other. This made the market doubt whether oil prices could remain at their current lows, while increasing uncertainty about inflation and interest rate prospects," he said.
Oil prices rose after Iran launched missiles and drones targeting US military bases in Kuwait and Bahrain on Sunday morning, shortly after US President Donald Trump warned he would "eliminate" Iranian leaders if Tehran did not comply with the agreement to end the conflict.
However, according to Axios, Washington and Tehran later agreed to end military actions in the Persian Gulf region and resume negotiations on disagreements related to the Strait of Hormuz.
High oil prices could increase inflationary pressure and boost the Fed's ability to continue raising interest rates. Although gold is often seen as an inflation hedging tool, this precious metal becomes less attractive in a high interest rate environment because it does not yield yields.
According to the CME FedWatch tool, the market currently expects the Fed to raise interest rates three times this year, and assesses about 80% of the possibility that the US central bank will raise interest rates at the December meeting.
This week, investors will pay special attention to the ADP private sector jobs report in June and the US Nonfarm Payrolls report to have more basis for assessing the Fed's monetary policy outlook.
Mr. Tim Waterer believes that gold still has a chance to return to the 5,000 USD/ounce mark this year, but that will depend on many conditions.
Gold prices may return to the 5,000 USD/ounce mark this year if geopolitical tensions continue to cool down, oil prices remain stable in the pre-conflict zone, thereby reducing inflationary pressure, and the USD weakens," he said.
In the precious metals market, spot silver price decreased 0.9% to 58.64 USD/ounce. Meanwhile, platinum prices increased slightly by 0.1% to 1,616.55 USD/ounce and palladium increased 1% to 1,221.29 USD/ounce.
