(April 28): Gold declined as the Strait of Hormuz stayed largely closed to shipping, despite the latest efforts to find a negotiated solution to the US-Iran war that’s choked energy supplies and heightened inflation risks.
Bullion fell as much as 2.7%, dropping well below US$4,600 an ounce. Iran has signalled it may be willing to accept an interim deal to reopen the crucial waterway in exchange for Washington ending its blockade of Iranian ports, but President Donald Trump is not satisfied with the proposal, the New York Times reported. Oil extended a rally.
The energy-supply shock caused by the eight-week conflict has added to inflation risks, raising the likelihood that central banks will keep rates steady for longer or even hike them, which is a headwind for non-yielding bullion. Gold has lost more than 13% since the conflict began at the end of February.
“If the increase in oil prices continues, market participants could even start pricing in an interest rate hike again, as they did in mid-March,” analysts at Commerzbank AG wrote in a note on Tuesday. “In that case, the gold price could, as it did then, fall back towards USD 4,500 per troy ounce.”
Traders will be keeping tabs on interest-rate decisions in the US, the European Union, the UK and Canada this week. Earlier Tuesday, the Bank of Japan left its benchmark rate unchanged at 0.75%, with a split vote suggesting increased odds of a hike in June.
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Spot gold fell 2.4% to US$4,570.19 an ounce at 1.06pm in London. Silver slid 4.0% to US$72.51 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.3%.
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