World gold prices continued to face pressure in the last session of the week and are heading towards their third consecutive week of decline as the high interest rate outlook of the US Federal Reserve (Fed) overwhelms supporting factors from the energy market.
Gold prices at one point fell by 2.1%, to around the threshold of 4,122 USD/ounce in Friday's trading session. As of 14:41 Vietnam time, spot gold prices fell 1.67%, to 4,155.75 USD/ounce.
Gold's decline came after the Fed kept interest rates unchanged but sent a tougher message about inflation and left open the possibility of raising interest rates in the near future.
New Fed Chairman Kevin Warsh shows that the top priority is still controlling inflation, causing the market to increase bets on the possibility of tightening monetary policy this year.
High interest rates are often detrimental to gold because precious metals do not yield yields and must compete with other profitable assets.
Meanwhile, commercial transportation through the Strait of Hormuz is gradually being restored, helping to reduce concerns about the risk of disruption to global energy supplies.
However, many experts believe that inflationary pressure has not completely disappeared as the recovery process of oil and natural gas transportation through this important maritime route may take more time.
Mr. Christopher Wong – Strategist at Oversea-Chinese Banking Corp (OCBC) said that the gradual stabilization of energy transportation is a positive factor for gold, but is currently not enough to compensate for the impact from the Fed's monetary policy outlook.
The improvement in energy supply is beneficial for gold, but that impact is being overwhelmed by expectations that the Fed will continue to tighten policy. Historically, gold has often performed less positively before the first interest rate hike took place," he said.
However, Mr. Wong also said that gold's outlook will depend on whether the Fed only implements a preventive interest rate hike or enters a new tightening cycle.
If this is not the beginning of a prolonged interest rate hike cycle, gold could completely regain its appeal in the near future," he said.
On other precious metals markets, silver prices fell 2.4% to 64.12 USD/ounce. Platinum and palladium also simultaneously went down.
Meanwhile, the Bloomberg USD index increased by 0.1% in the session and has increased by about 0.9% in the whole week, continuing to put pressure on the gold market.
