Gold prices fall amid rising inflation fears
Gold prices fell during trading on Monday at the start of the week, with the precious metal dropping by around 3% at the start of the session before later reducing its losses to around 1.5%, currently trading at around $5,100 per ounce.
This decline comes amid growing fears of a return to global inflation as a result of the sharp rise in energy and oil prices, which could prompt the US Federal Reserve to postpone interest rate cuts for a longer period.
Strong dollar puts pressure on gold
The US dollar rose significantly to its highest level in more than three months, putting pressure on gold prices.
A rise in the dollar usually increases the cost of buying gold for investors using other currencies and makes dollar-denominated commodities more expensive for buyers in global markets, reducing demand for the precious metal.
The rise in 10-year US Treasury yields to their highest level in a month is also putting pressure on the precious metal.
Higher yields have a negative impact on gold because the yellow metal does not generate a return, making it less attractive compared to assets that do.
Rising oil prices increase the risk of stagflation
On the other hand, global oil prices have risen sharply in recent times, currently trading at around $100 per barrel after reaching $113 per barrel at the start of trading today.
This rise comes after major oil producers in the Gulf began cutting production, which led to a tightening of supply in global markets.
Analysts believe that the current rise in oil prices reflects a shock on the supply side rather than an increase in demand, which increases the risk of stagflation in the global economy.
Fears of a delay in US interest rate cuts
Growing fears of inflation linked to rising energy prices could prompt major central banks, led by the US Federal Reserve, to keep interest rates high for longer.
If inflationary pressures persist, central banks may find themselves forced to balance fighting inflation with supporting economic growth, which could create an unstable economic environment in global markets.
Gold price forecasts for the coming period
The movement of gold prices in the coming period remains linked to several key factors, most notably:
- The strength of the US dollar
- The trend in US bond yields
- Developments in oil and energy prices
- The Federal Reserve's monetary policy decisions
- Geopolitical tensions arising from the war in the Middle East
If energy prices continue to rise and inflationary pressures increase, gold may face further volatility in the near term, especially given the ongoing war between the United States and Israel on the one hand, and Iran and Hezbollah on the other.
