Gold loses over 4% on Trump's statement on the Iran war

Gold prices fell more than 4% in European trading on Thursday, pulling back from a two-week high reached earlier in Asian trading, and heading toward their first loss in the past five days, as profit-taking accelerated and amid pressure from the broad strength of the US dollar against a basket of global currencies.

This sharp decline in the precious metal comes after US President Donald Trump’s remarks on developments in the Iran war, in which he confirmed that the United States will continue military operations against Iran in the coming weeks.

With global oil prices rising again, expectations for a Federal Reserve interest rate hike this year have strengthened. To reassess these expectations, investors are awaiting further key data on the US labor market.

Price Overview

Gold prices today: gold fell 4.3% to $4,554.28, down from the session opening level of $4,758.10, after hitting a high of $4,800.38, the highest level since March 19.

At Wednesday’s settlement, gold rose 1.9%, marking its fourth consecutive daily gain, supported by a weaker US dollar following reports that Trump is seeking to exit the war with Iran.

US dollar

The dollar index rose 0.65% on Thursday, resuming gains that had paused over the past two sessions, reflecting broad strength in the US currency against a basket of major and minor currencies.

Dollar buying as a preferred safe-haven asset resumed following US President Donald Trump’s address to the nation regarding developments in the Iran war.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said Trump’s remarks did not reassure markets, noting that markets are beginning to realize that the war is likely to escalate before it de-escalates.

Kong added that the US dollar is expected to rise further against all major currencies, especially as markets recognize that the global economy will experience a noticeable slowdown.

Trump’s speech

Trump focused on several key points regarding the trajectory of the Iran war, most notably:

• The military operation against Iran will continue until all objectives are achieved.

• Major military operations will continue for only two to three more weeks.

• Iranian energy infrastructure will be targeted if no agreement is reached.

• The United States does not need Middle East oil, and US oil production will rise significantly soon.

• The United States does not need the Strait of Hormuz, and the strait will reopen automatically once the conflict ends.

• Countries affected by the closure of the Strait of Hormuz should act to protect this vital shipping route.

Global oil prices

Global oil prices surged by an average of 9% on Thursday, with US crude reaching its highest level in four weeks, amid renewed concerns over continued supply disruptions from the Gulf region due to the closure of Hormuz, especially after the United States stepped back from efforts to reopen this key global energy shipping route.

US interest rates

St. Louis Federal Reserve President Alberto Musalem said there is no need to change the Fed’s interest rate policy at the moment amid rising inflation risks.

Following the rise in oil prices, according to the CME FedWatch tool from CME Group, markets reduced pricing for keeping US interest rates unchanged at the April meeting from 99% to 95%, while the probability of a 25-basis-point rate hike increased from 1% to 5%.

To reassess these expectations, investors are closely monitoring a series of very important US labor market data releases.

Weekly US jobless claims are due later today, while the March jobs report will be released on Friday.

Gold outlook

Independent metals trader Tai Wong said gold is declining after two strong days, noting that Trump’s speech was aggressive and pointed to offensive plans in the coming weeks, suggesting that the optimism seen in recent days had been excessive and that some pullback is likely ahead of the long weekend.

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by 3.72 metric tons on Wednesday, marking the second consecutive daily rise and bringing the total to 1,050.99 metric tons.