Gold Prices Plunge in Free Fall, Traders Like 'Confused Rabbits'

Gold prices have fallen for two consecutive weeks. They are under pressure from higher oil prices, which keep inflation worries at the forefront and lift market bets on a US rate increase. Refinitiv data show that gold, on Friday, closed at $4,508.73 per troy ounce, down 0.8%, erasing the previous two-day gain of 1.4%. Gold closed yesterday at its lowest level in four days. Over the week, gold prices fell 0.65%, implying a drop over the past two weeks. ‘Market participants at present are like rabbits staring at headlights, focused on Hormuz and its impact on broad supply-chain disruptions, which in turn fuels inflation concerns and the potential for higher rates,’ said StoneX analyst Rhona O’Connell, referring to the Hormuz Strait oil shipments, cited by Refinitiv. Oil prices rose as investors doubt that US–Iran peace talks will deliver a meaningful breakthrough. The yield on the US 10-year Treasury note pared earlier losses and remained near its highest level in more than a year, reducing the appeal of non‑yielding gold. Higher energy costs tend to lift inflation and could push central banks to keep policy rates higher for longer, dampening demand for non‑yielding precious metals like gold, although gold is also viewed as an inflation hedge. According to CME Group’s FedWatch tool, market participants priced in a 58% probability of at least one Fed rate hike of 25 basis points before December. Fed Governor Christopher Waller, who had previously supported rate cuts, said the central bank should drop its easing bias and leave room for rate hikes. Meanwhile, US consumer sentiment fell to a record low in May as higher gasoline prices raised concerns about deteriorating purchasing power, according to a survey released on Friday.