Gold Prices Fall Amid Rising Expectations of Monetary Policy Tightening

Gold Declines as Inflation Concerns Fuel Interest Rate Hike Bets

Gold prices declined on Thursday, driven by persistent concerns over inflation that have fueled bets that global central banks may be forced to hike interest rates. Silver slumped to its lowest level in nearly two weeks, with the precious metal slipping as much as 2.2% before recouping some of its losses. Concerns over price pressures stemming from the Iran war helped fuel a selloff in global bond markets, with 30-year yields climbing to a level last seen on the brink of the global financial crisis in 2007.

The selloff in gold and silver prices was exacerbated by elevated energy prices, which have stoked inflation fears and raised the risk that the Federal Reserve and other central banks may need to keep rates elevated rather than deliver the cuts investors had expected before the US and Israel launched their war on Iran. Lower rates benefit bullion, which doesn't carry interest. Gold has traded in a narrow range since falling sharply in the early days of the conflict as inflationary fears were moderated by the possibility of monetary easing on growth concerns.

Bullion is down nearly 15% since the conflict erupted. The fluidity with regards to the situation in the Middle East, along with oil prices and bond yields, may still weigh on gold in the short term. Vasu Menon, a strategist at Oversea-Chinese Banking Corp., continues to see gold as a useful hedge against global uncertainties given significant political and economic changes happening globally, which look set to gather pace in the coming years.

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Silver has swung wildly this month, climbing to nearly $90 an ounce last week on optimism around AI-related equities and demand for metals used in data-center infrastructure, before retreating to around $74 on Tuesday. Spot gold was 1.8% lower at $4,486.63 an ounce as of 10:55 a.m. in New York. Silver was down 5% at $73.81. Platinum and palladium also declined.

Market Data

• Spot gold price: $4,486.63 an ounce
• Silver price: $73.81
• 30-year bond yields: Climbed to a level last seen on the brink of the global financial crisis in 2007.

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