Gold prices fall as oil gains increase rate uncertainty
Gold prices were under pressure Tuesday, as the oil price rose due to fading hopes of an Iran peace agreement. This added to concerns over inflation and a possible rise in global interest rates.
By 1601 GMT, spot gold had fallen 1.4% to $4669.33 an ounce. U.S. Gold Futures fell 1.1% to $4675.90.
"Higher oil costs raise the risk that U.S. central banks and others may have to increase interest rate to combat what would certainly emerge as stagflation. Gold is reacting to 'that,' said Bart Melek of TD Securities.
As?hopes of a peace agreement with Iran faded, U.S. president Donald Trump said that a ceasefire is "on life support", as Tehran rejected an U.S. proposal for ending the conflict.
The data showed that U.S. Consumer Prices rose for the second consecutive month in April. This resulted in the highest annual inflation increase in almost three years, and further reinforced?expectations? the Federal Reserve will?keep rates unchanged for some time.
Gold is often considered to be a hedge against rising inflation rates, but higher rates can put pressure on this non-yielding investment.
Joni Teves is a precious metals analyst at UBS Investment Bank. She said that the outlook for gold remains bullish as long as its underlying drivers are intact.
She added, "We still believe prices can recover and continue to reach new highs this year."
The Producer Price Index, which is scheduled to be released on Wednesday, and the meeting between Trump and Chinese president Xi Jinping scheduled for Thursday and Friday in Beijing are also of interest.
Spot silver dropped 2% to $84.30, after reaching a 2-month high.
Analysts at SP Angel stated in a note that silver prices rose on the expectation of a growing deficit due to the demand for physical metal. Analysts at SP Angel said that increased EV'sales are being driven by higher oil prices, which is likely to increase demand for silver used in solar and renewable energy technologies.
Sources say that Indian banks have resumed imports of gold and silver after a hiatus lasting more than a month. They did this by paying a customs tax of 3%, which had previously prompted them to stop shipments.
Palladium fell 2.7% to $1,468.07, while platinum dropped 1.7% to $2096.14. Ashitha Shivprasad, reporting from Bengaluru. Keith Weir & Ali Williams are editing.
(source: Reuters)
