Precise Investors Editorial Team
Spot gold was down 0.7 per cent at $4,705.37 per ounce
Gold dropped on Thursday as elevated oil prices fuelled fears of inflation and prolonged high interest rates, while investors looked for clarity on the stalled U.S.-Iran peace talks.
Spot gold was down 0.7 per cent at $4,705.37 per ounce, as of 0432 GMT. U.S. gold futures for June delivery dropped 0.7 per cent to $4,720.90.
Brent crude oil prices remained above $100 a barrel after larger-than-expected gasoline and distillate stock draws in the U.S., and over a lack of progress on the peace talks.
The sight of Brent oil back at triple digits is keeping inflation worries at the forefront, and is putting gold on the back foot today, said Tim Waterer, chief market analyst at KCM Trade.
Higher crude oil prices can stoke inflation by raising transportation and production costs, increasing the likelihood of higher interest rates.
While gold is considered an inflation hedge, high interest rates make yield-bearing assets more attractive, weighing on bullion’s appeal.
Iran seized two ships in the Strait of Hormuz on Wednesday, tightening its grip on the strategic waterway after the U.S. president called off attacks with no sign of the peace talks restarting.
The president maintained the U.S. blockade of Iran’s trade by sea, and Iran’s parliament speaker and top negotiator Mohammad Baqer Qalibaf said a full ceasefire only made sense if it was lifted.
Investors are worried that this ‘ceasefire-plus-blockade’ status quo could drag on for months, turning a short-term spike into a long-term inflationary anchor, which would hurt gold from a yield perspective, said Waterer.
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