Gold Falls for Third Day as Iran War Fans Inflation Fears
(Bloomberg) — Gold prices continued their decline as investors focused on talks between the United States and Iran and the indefinite closure of the Strait of Hormuz continued to raise inflation risks.
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Bullion traded as low as 1.9% at just above $4,500 an ounce, after falling 2.4% in the previous two sessions. The United States has signaled it will continue its naval blockade of Iranian ports as it seeks to halt Tehran’s oil exports and force it back to the negotiating table. According to CNN, negotiators in Pakistan expect Tehran to submit a revised offer in the next few days.
Investors also follow interest rate decisions in the United States, the European Union and the United Kingdom. On Tuesday, the Bank of Japan left its benchmark interest rate unchanged at 0.75%; The split vote showed an increased likelihood of a rate hike in June.
While Bloomberg Economics stated that the Fed is expected to keep rates constant at its meeting on Wednesday, it said investors are also paying attention to whether Jerome Powell will remain on the board after his presidential term ends.
Inflation risks are fueled by the energy supply shock, which raises the possibility that central banks will keep interest rates steady for longer or even raise them; This is a negative situation for inefficient bullion. Rising bond yields have also increased the opportunity cost of holding gold. The precious metal has lost nearly 13% since the conflict began in late February, while crude oil has risen.
“Some technical selling has emerged following the break below recent support around $4,650,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said in a note. “The market’s focus remains on mediation efforts, with the reopening of the strait and the subsequent drop in oil being the biggest near-term bullish catalyst for metals.”
Spot gold fell 1.3% to $4,537.21 per ounce at 16:15 London time. Silver fell 2.1% to $71.55 per ounce, while platinum and palladium also fell. The Bloomberg Dollar Spot Index, an indicator of the US currency, rose 0.2 percent.
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