Gold prices fell sharply in the trading session on June 24 as concerns about inflation and prolonged high interest rate prospects continued to overwhelm positive signals from peace talks between the US and Iran.
The precious metal at one point fell by 1.8%, to nearly 4,115 USD/ounce, wiping out the modest increase recorded in the previous session.
Pressure on gold stems from concerns that global inflation will continue to remain high after nearly four months of conflict in the Middle East. The sharp increase in energy prices in recent times has increased the possibility that central banks will have to continue raising interest rates to control inflation.
This is a disadvantageous factor for gold because the precious metal does not generate profits and is often under pressure in a high interest rate environment.
Chairman of the Chicago Fed Austan Goolsbee said he is still concerned about inflation and is not sure whether the current factors pushing prices up are temporary or will last.
We are facing an inflation problem that is still significantly higher than the target and recent developments are unfavorable," he said in a radio interview in the US.
The market also continued to react to the tough stance of new Fed Chairman Kevin Warsh at last week's policy meeting.
According to analysts, Mr. Warsh's "hawkish" statements have caused investors to strongly adjust their expectations for monetary policy, thereby overshadowing the positive impact of the temporary peace agreement between the US and Iran signed last week.
Since the Fed's most recent meeting, the USD has increased by more than 1%, adding pressure on gold as the precious metal is valued in this currency.
Mr. Michael Hsueh - Analyst at Deutsche Bank - said that the market's continuous re-adjustment of expectations about Fed policy along with the resilience of the US economy is the main reason for the weakening of gold.
The market's revaluation of the Fed's policy outlook, along with still positive US economic data, has played a key role in pulling gold prices down," he said.
In its latest report, Deutsche Bank sharply lowered its Q3 gold price forecast to 4,300 USD/ounce, 22% lower than the previous forecast. The forecast for Q4 was also adjusted down to 4,800 USD/ounce.
This move comes just days after Goldman Sachs cut $500 in its year-end gold price forecast, down to $4,900/ounce due to no longer expecting the Fed to cut interest rates this year.
Since the conflict in the Middle East broke out at the end of February, gold prices have fallen more than 20%, while silver has lost about one-third of its value.
Investors are currently focusing their attention on the US Personal Consumption Price Index (PCE) which will be released on June 26. This is an inflation measure that the Fed is specifically monitoring and may significantly affect interest rate expectations in the near future.
Mr. Ahmad Assiri - Analyst at Pepperstone said that gold may continue to fluctuate in a narrow range until more important economic data appears.
I lean towards the scenario that gold prices will fluctuate in the range of $4,000 – $4,300/ounce until new data is sufficient to change the outlook for monetary policy or confirm the Fed's current tough stance," he said.
However, the market still recorded some supporting signals from negotiations between the US and Iran.
US Vice President JD Vance said contacts with Tehran are taking place "very positively". Iranian officials also confirmed that the negotiation process has made some progress, although there are still many issues to be resolved to fully implement the memorandum of understanding signed last week.
Ms. Rhona O'Connell - Market Analysis Director for Europe, Middle East, Africa and Asia at StoneX Group - said that gold and silver are still mainly affected by external factors.
The gold and silver markets are still dominated by external factors and are not ready to form a clear trend in any direction. Technical signals are not yet really positive, although some capital flows are showing signs of improvement," she said.
As of 2:03 PM Vietnam time, spot gold price decreased by 1.58% to 4,118.39 USD/ounce. Silver price decreased by 4.3% to 62.31 USD/ounce. Meanwhile, platinum and palladium prices both decreased by more than 2%.
The Bloomberg Dollar Spot Index, a gauge of the dollar's strength, added 0.1%.
