Apr 22 2024: Asian trading on Monday, gold prices experienced a decline as worries about a larger conflict in the Middle East diminished, reducing the safe-haven appeal of the precious metal. Additionally, expectations of prolonged higher U.S. interest rates continued to exert downward pressure on gold prices.
Spot gold dropped by 0.9% to $2,370.45 per ounce, while gold futures expiring in June fell by 1.2% to $2,384.05 per ounce as of 00:48 ET (04:48 GMT).
The recent strength in gold, which saw it reaching record highs above $2,400 per ounce, was fueled by tensions between Iran and Israel that led to strikes from both sides. However, Iran’s minimization of the impact of an Israeli strike on Friday, coupled with a lack of immediate plans for retaliation, tempered concerns and reduced safe-haven demand for gold.
Nevertheless, ongoing strikes by forces in Iraq against a U.S. military base in Syria, alongside continued Israeli offensive actions in Gaza, kept some level of tension in the Middle East. The failure of Israel and Hamas to reach a ceasefire agreement also contributed to ongoing regional concerns.
Meanwhile, in the financial markets, the U.S. dollar remained steady near five-month highs, and U.S. Treasury yields rose as traders remained cautious about the potential for higher interest rates. Strong inflation data for March and hawkish signals from Federal Reserve officials led traders to adjust their expectations, largely removing the possibility of a June rate cut by the Fed. This expectation of sustained higher interest rates dampened the appeal of gold, as it increases the opportunity cost of holding non-interest-bearing assets like bullion.
Additionally, gold had recently entered overbought territory, making it susceptible to profit-taking, especially in a context of expectations for stable interest rates.
Other precious metals also experienced declines on Monday, with platinum futures dipping slightly to $943.80 per ounce, and silver futures sliding by 2.8% to $28.038 per ounce.
On the industrial metals front, copper and aluminum prices rose slightly on Monday, reaching new highs for 2024 due to concerns about tight supply conditions following stricter sanctions on Russian metal exports. Three-month copper futures on the London Metal Exchange climbed by 0.3% to $9,919.50 per ton, while one-month copper futures increased by 0.4% to $4.5105 per pound, both reaching approximately two-year highs. Aluminum futures also rose by 0.2% to $2,671.0 per ton, marking their highest level since June 2022.