Gold Heads for Third Weekly Loss as Fed Hawkishness Overshadows Iran-US Peace Deal
By Aboki Forex —
Gold is set for a third straight weekly drop. The metal fell as much as 2.1% on Friday to around $4,122 per ounce.
The decline follows a hawkish speech from new Federal Reserve Chairman Kevin Warsh on Wednesday. His comments raised expectations that the US central bank will tighten monetary policy this year. Since gold pays no interest, higher rates make it less attractive to investors.
Meanwhile, the US and Iran signed an interim peace deal. The US also ended its blockade of the Strait of Hormuz. Commercial shipping is now returning to the waterway. Analysts say this eases fears of prolonged energy shortages.
But inflation worries remain. It may take months or longer for oil and LNG volumes through the strait to return to normal, analysts note.
Christopher Wong, a strategist at Oversea-Chinese Banking Corp, said the reopening of the strait is positive for gold. But that is offset by the Fed tightening. “Historically, gold underperforms in the lead up to the first hike,” he said.
Wong added that it is unclear if this is an insurance hike or the start of a hiking cycle. “If it is not the start of another cycle, then there is a good chance gold may regain some glitter,” he said.
Gold traded at $4,144.58 an ounce as of 2:25 p.m. Singapore time, down 1.6% for the day. Silver dropped 2.4% to $64.1235. Platinum and palladium also declined. The Bloomberg Dollar Spot Index was up 0.1% for the day and 0.9% for the week.