Gold extends losses as US strikes dampen Iran peace talk hopes
SINGAPORE: Gold extended a two-day decline as fresh US airstrikes on an Iranian military base risked derailing peace talks and kept inflation risks high.
Bullion fell as much as 1% to around US$4,405 an ounce, after sliding 2.6% in the previous two sessions. A US official described the American attacks as defensive, saying forces had shot down a quartet of one-way Iranian attack drones that were fired at a commercial ship, as well as a drone-launching unit near the Strait of Hormuz.
The incidents came hours after US President Donald Trump said he was “not satisfied” in negotiations with Iran, damping expectations for an imminent breakthrough.
Trump didn’t indicate what steps the US would take to ensure free passage of vessels through the Strait of Hormuz, a key sticking point in resolving the war with Iran. The near-closure of the crucial energy waterway has triggered price surges for oil products that have shaken the global economy since late February.
Even if a deal is imminent, higher energy prices are likely to keep inflation elevated and force central banks to hold rates higher for longer, rather than deliver cuts many expected before the Iran war. Bullion typically performs badly in a higher-rate environment as it pays no interest. It has slumped more than 16% since the Iran conflict erupted in late February, nearly erasing year-to-date gains.
US Federal Reserve governor Lisa Cook on Wednesday said inflation is heading in the wrong direction and she would be prepared to raise interest rates if that persists.
“Traders are losing confidence in the safe haven narrative and they have better things to do with the money in the meantime, preparing for mega IPOs in both Asia (CXMT) and the US (Space X),” said Justin Lin, an investment strategist at Global X ETFs Australia. Gold is likely “looking at US$4,000-4,250 range for support if oil trades higher,” he added.
Spot gold was down 1.1% at US$4,404.89 an ounce as of 10.20 am. Silver was 2% lower at US$73.19. Platinum and palladium also retreated. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.1% higher.
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