In Asian trading on Tuesday, gold prices experienced a decline, extending losses from the previous session as worries over geopolitical tensions in the Middle East eased, diminishing the appeal of the precious metal as a safe haven.
Spot gold dropped by 0.9% to $2,305.14 per ounce, while gold futures for June delivery fell by 1.1% to $2,319.70 per ounce by 00:45 ET (04:45 GMT). These prices represent a significant retreat from the record high of approximately $2,430 per ounce reached earlier in April.
The reduction in tensions between Iran and Israel contributed to the decline in gold prices, as traders began to factor out risk premiums associated with geopolitical uncertainty from commodity prices. Gold had seen a surge in demand as a safe haven asset over the past couple of weeks following military actions between Iran and Israel. However, reports indicating that Tehran was not seeking immediate retaliation after Israel’s latest attack led to a decrease in safe haven demand for gold.
Furthermore, gold faced pressure from the prospect of higher U.S. interest rates, following recent signals of a more hawkish stance from the Federal Reserve and persistent inflation readings. Higher interest rates increase the opportunity cost of holding non-interest-bearing assets like gold, leading investors to seek alternative investments.
Investor focus this week is on the Personal Consumption Expenditures (PCE) price index data, the Federal Reserve’s preferred measure of inflation, which could provide further insight into the trajectory of interest rates.
In addition to gold, other precious metals also experienced declines on Tuesday. Platinum futures fell by 0.9% to $922.35 per ounce, while silver futures slid by 0.8% to $27.017 per ounce.
Industrial metals, including copper and aluminum, also faced downward pressure. Copper prices retreated from near two-year highs after Chile, the world’s top producer, announced plans to increase production at state-run miner Codelco this year. Three-month copper futures on the London Metal Exchange fell by 1.2% to $9,749.50 per ton, while one-month copper futures declined by 1.1% to $4.4343 per pound, both moving away from recent highs. Similarly, aluminum prices dropped by 1% from recent 15-month peaks amidst the broader selling pressure in industrial metals.