54 mins ago
Gold Falls as Iran Impasse Fuels Further Fed Rate Bets
Gold prices were slightly lower on Friday and fell during the week.
Gold lost 2.4% over the week.
Oil prices had recently risen sharply, which increased worries about inflation.
Those worries made investors think the Federal Reserve might raise interest rates more.
Higher interest rates can make gold less attractive because gold does not pay interest.
Lower Treasury yields on Friday helped gold avoid a larger decline.
Reports said the United States and Iran might be discussing a phased deal.
The deal could involve reopening the Strait of Hormuz and lifting a US port blockade.
Some investors still believe gold could rise over the longer term as a way to protect a portfolio.
Gold was down 2.4% for the week as energy prices lifted bond yields and increased expectations for further Federal Reserve rate hikes.
Spot gold was little changed at $4,281.05 an ounce in New York on Friday.
Oil prices had risen more than 7% over two days before declining amid reports of possible US-Iran negotiations involving the Strait of Hormuz and a port blockade.
Higher borrowing costs generally pressure gold because bullion does not pay interest, although lower Treasury yields on Friday offered some support.
US consumer sentiment fell to a four-month low of 48.1 in September as concerns about higher prices deepened.
- Who
- Gold traders, the Federal Reserve, US and Iranian negotiators, and US consumers are involved in the developments described.
- What
- Gold was set to end the week lower as energy prices and inflation concerns increased expectations for further Federal Reserve rate hikes.
- Where
- Gold was priced in New York; possible negotiations involved Iran, the Strait of Hormuz, Washington, and a US port blockade.
- When
- Friday, with gold down 2.4% for the week; the University of Michigan sentiment reading covered September.
- Why
- Higher energy prices raised inflation concerns, which pushed bond yields and rate-hike expectations higher, creating pressure on non-interest-bearing gold.
Near-Term Gold Pressure
Longer-Term Gold Support
Interest rates and energy prices
Near-Term Gold Pressure
Higher energy prices, bond yields, and expectations for further Federal Reserve tightening create a difficult backdrop for gold because it pays no interest.
Longer-Term Gold Support
Gold’s longer-term bullish drivers remain intact, and some investors expect it to rise as a portfolio hedge.
Need for a new catalyst
Near-Term Gold Pressure
Analyst Christopher Wong said gold may need a fresh catalyst before making another meaningful move higher.
Longer-Term Gold Support
Despite near-term headwinds, investors continue betting that gold can gradually regain upward momentum as a traditional portfolio hedge.
Key facts
- Weekly gold performance
- Gold was 2.4% lower for the week.
- Spot gold price
- $4,281.05 an ounce at 11:01 a.m. in New York on Friday.
- Silver price
- Silver rose 0.7% to $64.23 an ounce.
- September gold range
- Gold traded in a relatively narrow range around $4,300 an ounce.
- US consumer sentiment
- The University of Michigan’s final September index fell to 48.1, a four-month low.
- Oil movement
- Oil declined on Friday after rising more than 7% over the previous two days.
- Potential diplomatic arrangement
- Reports said negotiators were exploring a phased deal involving the reopening of the Strait of Hormuz and the lifting of a Washington port blockade.
Quotes
Christopher Wong
Analyst at Oversea-Chinese Banking Corp.
“There probably needs to be a fresh catalyst before the next meaningful leg higher.”
livemint.com
Sources
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