(May 11): Gold fell as US President Donald Trump’s rejection of Iran’s latest peace offer to end the war in the Middle East fanned inflation fears.
Bullion traded near US$4,674 an ounce after rising around 2% last week. Peace progress was derailed again after Trump labelled Iran’s latest response to his proposal to end the conflict as “totally unacceptable". The setback may keep the inflation risk elevated as well as the expectation for higher interest rates, which weigh on non-yielding bullion.
Weekend attacks in the Middle East also underscored the fragility of the ceasefire that began on April 8. A drone strike on Sunday briefly set a cargo vessel ablaze off Qatar in the Persian Gulf. The United Arab Emirates and Kuwait also said they had intercepted hostile drones.
Looking ahead, consumer price data due Tuesday is likely to affirm inflation remains a threat in the US, following March’s biggest monthly advance since 2022.
Trump’s rejection of the latest proposal shows that his priority appears to be curbing Iran’s nuclear ambition, which means “either further escalation in the Middle East or stalling talks at best", Priyanka Sachdeva, an analyst at Phillip Nova Pte Ltd, said in a note.
See also: Gold declines as jump in US inflation lifts rate-hike odds
“Gold prices continue to reflect a broad sideways consolidation, as markets remain trapped between geopolitical anxiety and rising inflation worries,” she added. The combination is likely to keep gold “directionless despite extreme volatility across global markets".
Current Federal Reserve Chair Jerome Powell’s tenure is set to end this week. His term has been marked by his resistance against political influence. Threats to the Fed’s independence had been a key factor contributing to gold’s rally early this year.
Data released Friday showed that US employers added to payrolls for a second month in April, marking the first back-to-back advance in nearly a year, and the unemployment rate held steady at 4.3%. This offers the Federal Reserve space to keep interest rates unchanged for the foreseeable future as they focus on fresh inflationary risks from the war with Iran.
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Spot gold fell 0.9% to US$4,673.92 an ounce as of 1.40pm in Singapore. Silver was up 0.2% to US$80.50. Platinum and palladium declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, was up 0.2%.
Uploaded by Arion Yeow
