Global Gold Price Today, Tuesday, 21 Mehr 1405: Middle East Tensions Overshadow Interest Rates
Global gold prices continued their downward trend amid escalating Middle East tensions and growing concern about disruptions to energy supply. Concerns over rising oil prices and persistent inflation have strengthened the likelihood of tighter monetary policy, reducing the appeal of the precious metal for investors.
According to Ambassador Arjan, the price of one ounce of cash gold reached $4,163 with a drop of 0.2%. Gold futures were also traded with a decrease of 0.1% at the level of 4186 dollars and 45 cents. Silver also fell by 0.4% and reached around 60 dollars and 7 cents per ounce.
More expensive oil, more pressure on gold
The increase in geopolitical tensions in the Middle East, contrary to the usual market pattern in which gold benefits from increased demand for safe assets, this time has become a factor to weaken the price of this metal.
Attacks by Houthi forces on Saudi Arabia's main airport have raised concerns about the spread of conflicts and disruption of energy supplies. Meanwhile, the price of Brent oil approached the range of $106 per barrel.
The increase in energy prices can increase the cost of production and transportation and intensify inflationary pressures in the global economy. In such a situation, central banks may be forced to keep interest rates at high levels or even increase them to curb inflation.
This scenario is unfavorable for gold, which, unlike bonds and interest-bearing deposits, does not generate periodic income. An increase in interest rates and bond yields increases the opportunity cost of holding gold and can eliminate part of the investment demand for this metal.
Gold has lost about a fifth of its value since the start of the US-Iran war in late February; A drop that shows that in the current situation, concerns about inflation and rising interest rates have largely overcome the traditional demand for gold as a safe-haven asset.
Along with developments in the Middle East, the release of US inflation data has become the most important short-term driver of the precious metals market. Investors are awaiting the release of the US consumer price index on Wednesday for a more accurate assessment of the future direction of the Federal Reserve's monetary policy.
Based on the pricing of interest rate swap contracts, the possibility of another increase in the US interest rate in the October meeting of the Federal Reserve is estimated to be around 20%. Also, the markets have included in their calculations the possibility of another interest rate increase by the end of the year.
Cleveland Federal Reserve President Beth Hammock said on Monday that smaller, more frequent monetary policy adjustments could help curb inflationary expectations; However, he did not explicitly support a rate hike in October.
In the event of the release of higher-than-expected US inflation statistics, the possibility of continuation of the contractionary monetary policy will be strengthened, and this issue can put more pressure on the price of gold. On the other hand, the unexpected decrease in inflation may moderate the expectations of the interest rate increase and provide the basis for the improvement of the price of this metal.
The complex equation of gold in the shadow of war
The gold market is now facing two opposing forces: on the one hand, rising geopolitical uncertainties are fueling the demand for safe assets; On the other hand, the growth of energy prices and the risk of inflation increase the possibility of interest rate increase.
In the current situation, the influence of the second channel on the price of gold has become stronger. Therefore, the mere increase in military tensions is not enough to predict the rise of gold, and the reaction of central banks to the economic consequences of war is of decisive importance.
In the short term, US inflation data and energy market developments will determine the price path of precious metals. If the energy shock leads to a sustained increase in inflation and strengthens expectations of a contraction, gold may remain under pressure; But a decline in oil prices or the release of weaker-than-expected inflation data could ease some of this pressure.