Gold prices continued to fall in the trading session on June 24 as the USD appreciated due to increased market bets on the possibility of the US Federal Reserve (Fed) raising interest rates. Investors also assessed mixed signals related to US-Iran peace talks.
According to records, spot gold price at 3:17 PM on June 24 (Vietnam time listed around the threshold of 4,074.5 USD/ounce (down 0.85% during the day).
The psychology in the gold market is under more pressure as developments related to US-Iran relations have not shown certainty. US President Donald Trump said on June 23 that Iran has agreed to allow "permanent" nuclear inspections, while Tehran denied this information and affirmed that it has not made any concessions in the negotiations.
The two sides also disagreed on details of a clause allowing Iran to access blockaded sources of money abroad.
Mr. Ilya Spivak - Head of Global Macroeconomics at Tastylive - said that downward pressure on gold is continuing as the market adjusts expectations after geopolitical tensions.
Factors related to inflation and higher interest rates are being shown through the increase in bond yields, the strengthening of the USD and the decrease in gold prices," Mr. Spivak said.
This precious metal has fallen by about 23% since the US-Israel conflict with Iran broke out at the end of February. Initially, geopolitical tensions boosted safe-haven demand, supporting gold prices. However, increased inflationary pressure then caused the market to shift to expect the Fed to raise interest rates.
Gold is considered an inflation hedging tool, but the attractiveness of this precious metal is weakened in a high interest rate environment because gold does not generate cash flow.
The USD has risen to its highest level in more than a year, making gold more expensive for buyers using other currencies.
According to CME Group's FedWatch tool, traders currently predict that the Fed may raise interest rates three times this year, instead of just once as expected before the recent Fed policy meeting.
The market is currently awaiting US Personal Consumption Expenditures (PCE) data - an inflation measure of particular interest to the Fed - expected to be released on June 25 to have more signals about the direction of monetary policy.
Mr. Spivak warned that if the market continues to focus on inflation and gold prices break through the 4,000 USD/ounce mark, the precious metal may head towards the 3,800 USD/ounce zone, and even the possibility of retesting the 3,500 USD/ounce zone may appear.
On other precious metals markets, spot silver prices fell 0.4% to about 61.8 USD/ounce. Platinum prices fell 0.6%, listed around 1,641.35 USD/ounce, while palladium fell 1.3% to around 1,221.71 USD/ounce.
