Gold Falls Amid US Rate Hike and Middle East Tensions
Gold prices edged lower to near $4,365 during early Asian trading hours on Monday amid escalating tensions in the Middle East and hawkish comments from Federal Reserve officials. The precious metal's momentum was lost as governments across the region braced for an escalation of violence after Iran claimed it had received intelligence that Washington was preparing for a renewed bombing campaign.
The Fed raised interest rates by a quarter of a percentage point to 3.75%-4.0% last week and signaled more hikes in the coming months, making yield-bearing assets relatively more attractive compared to gold. Hawkish comments from Kansas City Fed President Jeffrey Schmid and Minneapolis Fed President Neel Kashkari reinforced this sentiment, with Schmid stating that recent data suggest inflation trending above 3%.
However, strategists at OCBC noted that while near-term headwinds from higher US rates and a strong Dollar may continue to cap gold prices, the medium-term case for the metal remains intact. They argued that softer US data could pull yields and the Dollar lower again, potentially restoring support for gold.