Gold prices fall to an 11-week low amid escalating tensions between the U.S. and Iran
Gold prices continued to fall during Wednesday’s trading session for the fourth consecutive day, hitting their lowest levels in about 11 weeks, amid escalating geopolitical tensions between the United States and Iran and rising oil prices, which have heightened concerns about global inflation and the prospects of tighter U.S. monetary policy.
Gold Falls to Lowest Levels in Weeks
The price of gold fell by about 2% during today’s trading, touching $4,172.50 per ounce, the lowest level recorded by the precious metal in more than two months, before paring some of its losses to trade near $4,190 per ounce.
This decline comes at a time when gold is facing increasing pressure due to rising expectations of U.S. interest rates, as well as improved investor appetite for other assets amid continued volatility in global markets.
Escalating US-Iran Tensions Heighten Geopolitical Risks
Tensions in the Middle East have escalated after the U.S. carried out airstrikes targeting sites inside Iran, following U.S. accusations that Tehran was responsible for downing a U.S. military helicopter in the Strait of Hormuz.
In response, the Iranian Revolutionary Guard announced attacks targeting U.S. military bases and sites in the region, including targets in Jordan, Bahrain, and several other locations in the Gulf, heightening global market concerns about the potential for the conflict to escalate. These developments have contributed to a significant rise in oil prices, driven by concerns over energy supplies and shipping traffic in vital maritime chokepoints.
Although gold is considered one of the most important hedges against inflation, the continued rise in prices may prompt central banks, led by the U.S. Federal Reserve, to keep interest rates high for a longer period or even raise them again, which would exert downward pressure on the precious metal.
This is because gold does not provide investors with a periodic return, reducing its appeal compared to assets that benefit from higher interest rates.
Markets Await U.S. Inflation Data
Investors’ attention this week is focused on a series of key economic data releases in the United States, chief among them the Consumer Price Index (CPI) for May, which will be released later today, as well as Producer Price Index (PPI) data scheduled for release tomorrow, Thursday.
These data points are among the key indicators the Federal Reserve relies on to assess the inflation outlook and determine monetary policy decisions in the coming period.
Market expectations currently indicate a probability exceeding 70% of a U.S. interest rate hike by December, according to estimates by financial market participants.
Technical Analysis of Gold
From a technical perspective, gold has successfully reached the bearish price targets identified in last week’s analysis here, and it has also completed a harmonic pattern on the four-hour timeframe.
These technical indicators suggest the possibility of an upward rebound and a temporary price correction following the recent sharp downtrend
however, the overall trend still requires further confirmation before we can speak of a genuine shift away from the downward trajectory.
Gold Price Forecast Gold’s
movement in the coming period remains primarily linked to three key factors:
- U.S. inflation data results.
- Federal Reserve decisions and expectations regarding interest rates.
- Developments in geopolitical tensions in the Middle East.
If inflation data comes in higher than expected, bets on interest rate hikes could strengthen, which may continue to put pressure on gold prices.
However, if the data shows a slowdown in inflation, the precious metal could find some support and see a corrective rebound in the coming period.
