Daily digest market movers: Gold price drops sharply as US yields advance
- Gold price tumbles to $2,360 after refreshing all-time highs near $2,430 as safe-haven demand diminishes. Investors are less worried about further escalation in Middle East tensions. On Friday, Tehran’s air defence said it destroyed a limited drone attack by Israel and confirmed no harm to nuclear facilities in the central region of Isfahan. Iran didn’t announce any plan for an immediate retaliation, so investors see no major escalation in the short term even as tensions between both parties persist.
- The precious metal comes under pressure after five weeks of gains as risk sentiment improves. The appeal for Gold has remained buoyant despite fading expectations that the Fed will reduce interest rates in June. Prospects for rate cuts in the June and July meetings have waned after the inflation report for March turned out hotter than expected.
- The recent inflation data have dented Fed policymakers' confidence in inflation declining to the 2% target, with many of them saying they want to maintain interest rates higher for a longer period. On Friday, Chicago Fed Bank President Austan Goolsbee said: “Given the strength of the labor market and progress on easing inflation seen over a longer arc, I believe the Fed's current restrictive monetary policy is appropriate," Reuters reported.
- Goolsbee said that hotter-than-expected inflation data for the first three months of the year "can't be dismissed.” He advised the Fed will need to determine if continued strong growth in the economy and job market is a sign of overheating.
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