Gold fell sharply in early Asian trading Wednesday after the United States conducted retaliatory strikes on Iran, the latest escalation in a conflict that has roiled commodity markets for months. The U.S. Central Command confirmed the strikes were launched Tuesday in response to the downing of an American Apache helicopter near the Strait of Hormuz.
Spot gold dropped 1.4% to $4,201.08 an ounce, resuming a downtrend that has erased gains from earlier this year. The precious metal has been under pressure from both geopolitical uncertainty and tightening monetary policy globally, with central banks raising rates to bring inflation under control.
In a note cited by The Wall Street Journal, UOB’s global economics and markets research team said gold likely remains weak due to rising global yields as central banks are expected to tighten their monetary-policy stances to tame inflation. Higher bond yields increase the opportunity cost of holding non-yielding assets like gold.
FOREX.com market analyst Fawad Razaqzada said in an email that gold’s focus now turns to continuation of the downtrend based on the daily chart. “Technically, the break below the previously defended support zone around the $4,350-$4,400 [an ounce] area had already left the market vulnerable,” Razaqzada said.
The next key level of interest is potentially $4,200 per ounce, Razaqzada said, adding that a sustained break below that level would expose the next major area around $4,000 per ounce. “Momentum is clearly aligned to the downside, and rallies are increasingly being sold rather than bought,” the analyst said.
In later trading, spot gold was down 0.9% at $4,223.19 an ounce, according to the Journal report. The U.S.-Iran conflict has been a recurring driver of volatility in gold and oil markets since hostilities flared early this year, with periodic cease-fires and escalations shifting investor sentiment.