Gold prices edged higher but are set for a significant monthly decline due to inflation concerns and geopolitical tensions. Hawkish signals from central banks, driven by oil-fueled inflation shocks, and the ongoing Middle East conflict are weighing on the precious metal.
- Gold rose toward $4,600 per ounce.
- Gold is poised for a roughly 13% drop in March.
- This would be gold’s worst monthly performance since October 2008.
- Oil-driven inflation is pushing investors towards a hawkish stance on interest rates.
- The Middle East conflict continues with no end in sight.
- Iran has effectively shut off the Strait of Hormuz.
- Iran has threatened to disrupt Red Sea shipping.
- Federal Reserve Chair Jerome Powell believes long-term US inflation expectations remain anchored.
- The Fed’s policy stance is positioned to assess the economic impact of the Iran war.
The asset faces downward pressure from a combination of factors. Inflationary pressures, particularly those originating from the oil market, are causing central banks to consider more aggressive interest rate hikes, making gold less attractive as an investment. Furthermore, geopolitical instability is adding to market uncertainty and impacting supply chains. Despite these challenges, statements suggest that long-term inflation expectations remain stable, potentially offering some support to the asset in the long run.