Gold Prices Slump Amid Waning US-Iran Peace Hopes
Gold prices declined on Tuesday, reversing their two-session winning streak, as oil prices surged and Treasury yields rose due to increased tensions in the Middle East. Spot gold decreased by 0.5% to $4,391.77 per ounce, while U.S. gold futures for December delivery dropped 0.6% to $4,447.30 per ounce.
According to independent analyst Ross Norman, gold is correcting due to a combination of traditional headwinds and profit-taking after strong gains. A prolonged Middle East crisis would lead to higher inflation possibilities and, by extension, a firmer dollar and Treasury yields, Norman said.
Oil prices reached their highest level in over two weeks, while the selloff in U.S. government bonds accelerated, sending the 30-year Treasury yield to its highest point in nearly two decades. The shift in Iran's military posture from 'fully defensive' to 'fully offensive' following a breakdown in ceasefire negotiations has raised energy prices and inflationary fears.
Higher interest rates tend to diminish gold's appeal as a hedge against economic uncertainty, despite the metal's history of performing well during times of turmoil. Norman expects the structural bull run, which began in 2022, to resume once oil supplies improve.