Gold prices fall as oil prices rise and rate uncertainty increases
Gold prices fell on Tuesday, as oil prices rose due to fading hopes of an Iranian peace deal. This was in addition to worries about inflation and higher interest rates.
By 1320 GMT, spot gold had fallen 1% to $4685.99 per ounce. U.S. Gold Futures fell 0.7% to $4693.90.
"Higher oil costs raise the risk that U.S. central banks and others may have to raise interest rates in order to combat what would certainly emerge as stagflation. Gold is responding to this," said Bart Melek. He's the global head of commodity strategies at TD Securities. Oil prices rose by over 3% after hopes of a peace agreement with Iran faded. U.S. president Donald Trump had said that a ceasefire deal with Iran was "on life-support" and Tehran rejected an U.S. proposal for ending the conflict. U.S. data showed that consumer prices in the United States rose for the second consecutive month in April. This resulted in the highest annual inflation rate in nearly three years.
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 they maintain a bullish view on gold, as the underlying drivers are still intact.
She added, "We believe prices will continue to rise this year and recover from their current levels." The Producer Price Index is scheduled to be released on Wednesday, and a meeting scheduled between?Trump's and Chinese President Xi Jinping to take place in Beijing from Thursday through?Friday.
After hitting a record high two months earlier, spot silver fell by 2.4% to $84.06.
Analysts at SP Angel wrote in a report that silver prices rose on the expectation of a growing deficit, as physical demand for silver increases. The analysts said that the higher oil 'prices' are driving EV sales which will in turn boost demand for silver used in solar and renewable energy -technologies. Sources say that Indian banks are resuming 'gold and silver imports' after a long hiatus. They agreed to pay the 3% customs tax that had previously prompted them to stop shipments.
Palladium fell 2.4% to $1,473.00, while platinum dropped 1.7% to $2096.19. Reporting by Ashitha shivaprasad, Bengaluru. Editing by Keith Weir
(source: Reuters)
