In Asian trading on Monday, gold prices experienced a decline as concerns regarding a larger conflict in the Middle East diminished, reducing safe-haven demand for the precious metal. Additionally, expectations of sustained higher U.S. interest rates exerted downward pressure on 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 prices, which saw the metal reaching record highs above $2,400 per ounce, was primarily fueled by escalating tensions between Iran and Israel, marked by strikes between the two nations. However, Iran’s downplaying of the impact of an Israeli strike on Friday, coupled with the absence of immediate plans for retaliation, contributed to hopes that the conflict might not escalate further, thereby reducing safe-haven demand for gold.
Nonetheless, reports on Monday revealed that forces in Iraq had launched strikes against a U.S. military base in Syria, while Israel continued its offensive against Gaza. These developments sustained some tensions in the Middle East, particularly as ceasefire negotiations between Israel and Hamas remained inconclusive.
Meanwhile, concerns over higher U.S. interest rates persisted, with the dollar stabilizing near five-month highs and U.S. Treasury yields advancing. Strong inflation data for March, along with hawkish signals from Federal Reserve officials, led traders to reassess expectations for a rate cut by the Fed in June. The anticipation of prolonged higher interest rates diminished the attractiveness of gold investments, given the increased opportunity cost associated with holding the precious metal.
Furthermore, gold had recently entered overbought territory, further exposing it to profit-taking amidst the backdrop of expectations for sustained interest rates.
In addition to gold, other precious metals also experienced declines on Monday. Platinum futures edged slightly lower to $943.80 per ounce, while silver futures saw a significant drop of 2.8% to $28.038 per ounce.
Turning to industrial metals, copper and aluminum prices recorded slight increases on Monday, reaching new highs for 2024 due to concerns about tightening supplies following stricter sanctions on Russian metal exports. Three-month copper futures on the London Metal Exchange rose 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 levels not seen in two years. Similarly, aluminum futures climbed by 0.2% to $2,671.0 per ton, marking their highest level since June 2022.
