Khaberni - Gold prices declined slightly yesterday, as hopes for a quick resolution ending the conflict between the United States and Iran diminished, keeping inflation concerns alive and casting doubt on interest rate expectations. Gold in spot transactions fell 1.3% to $4448.43 per ounce, and U.S. futures for June delivery also fell 1.3% to $4446.20.
The senior analyst at the global trading platform "F.X.T.M," Lukman Otunuga said: "Prices have fallen close to the $4450 level, amidst dwindling hopes of reaching a peace agreement between the United States and Iran," noting that gold faces further pressure due to rising expectations that the Federal Reserve (the U.S. central bank) might increase interest rates amid price pressures.
He added: "Ultimately, other indicators may increase the pressure on prices, betting that the Federal Reserve will keep interest rates high for a longer period, which heralds further declines for gold."
Meanwhile, the president of the Federal Reserve in Minneapolis, Neel Kashkari, emphasized the necessity for the central bank to focus on containing the seemingly growing inflation risks, indicating that it is "too early" to speculate on when interest rates might change again.
The "Fed Watch" tool by the "C.M.E Group" suggests that investors expect a potential interest rate increase by the "Federal Reserve" this year, with a 37% probability of a 25 basis point rise in December.
While gold is typically seen as a hedge against inflation, rising interest rates negatively affect the precious metal, which does not yield returns.
The markets are awaiting statements from Federal Reserve policymakers, including Vice Chairman Philip Jefferson and board member Lisa Cook, to assess the impact of inflation on the future monetary policy stance.
Investors are also anticipating the personal consumption expenditures index data for April in the United States, scheduled for release today, Thursday, to gauge any signs of the direction of U.S. monetary policy.
As for other precious metals, silver plummeted 3.3% in spot transactions to $74.38 per ounce, platinum declined 1.9% to $1921.04, and palladium lost 0.4% to $1385.03 per ounce.
