Gold prices have fallen to a two-month low amid the conflict between the U.S. and Iran – Reuters
Gold prices have fallen to their lowest level in two months. According to Reuters, despite geopolitical tensions, the metal is losing its appeal amid high interest rates because it does not generate investment income.
Gold prices have fallen to their lowest level in two months due to expectations of tighter monetary policy to curb inflation and the lack of signs that the U.S.-backed war with Iran will end soon.
According to Reuters, spot gold fell 1.3% to $4,447.71 per ounce ($143 per gram) after dropping to its lowest level since March 27 during the session. Meanwhile, U.S. gold futures for June delivery fell 1.2% to $4,448.40 per ounce ($143.1 per gram).
“The Middle East continues to have the greatest impact. Some optimism remained, but the longer the conflict drags on, the more it fades,” noted Peter Grant, vice president and senior precious metals strategist at Zaner Metals.
According to him, a protracted war only exacerbates inflation fears.
Gold has been under pressure since the start of the U.S.-Israeli war against Iran. The de facto closure of the Strait of Hormuz triggered a spike in Brent crude oil prices, which heightened inflation risks and expectations of rate hikes.
Iranian state television reported on May 27 that, under a framework agreement with the U.S., Tehran could restore shipping through the strait to pre-war levels within a month. The agreement also reportedly calls for the withdrawal of U.S. forces from Iran’s borders. Following this news, gold partially recouped its losses.
However, the market still expects that inflation, fueled by high energy prices, will force the U.S. Federal Reserve to raise the benchmark rate by another 25 basis points by the end of the year. Despite its status as a safe-haven asset against inflation, gold traditionally loses its appeal during periods of high interest rates, as it does not generate interest income.
Silver on the spot market fell 3.2% to $74.46 per ounce ($2.39 per gram). Platinum fell 2.1% to $1,916.90 per ounce ($61.6 per gram), while palladium rose 0.1% to $1,386.47 per ounce ($44.6 per gram).
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