Gold prices rise over 2% to hit a one-week high, but monthly decline may be the largest since 2008

1. On Tuesday during the Asian session, spot gold fluctuated higher, at one point rising 2.4% to around $4,619, marking a new high since March 20. Powell’s cautious approach towards the war dampened expectations of Fed rate hikes this year, while the US dollar index weakened slightly, providing upward momentum for gold prices. 2. Due to rising energy prices pushing up overall inflation, traders have almost completely ruled out the possibility of the Federal Reserve cutting rates this year, whereas the market previously expected two rate cuts before the war. Last week, the probability of a Fed rate hike within the year once rose to 40%, but this expectation quickly faded this week, especially after Fed Chair Powell’s remarks. 3. Fed Chair Powell stated on Monday that the Fed can wait and observe how the Iran war evolves in terms of its impact on the economy and inflation. Powell also pointed out that policymakers typically ignore the short-term effects of shocks such as rising oil prices. 4. Trump has warned that if Tehran does not open the Strait of Hormuz, the US will destroy Iran’s energy facilities and oil wells. Iran called the US peace proposal “unrealistic” and launched multiple rounds of missiles at Israel. 5. Geopolitical risks continue to drive up oil prices, and market concerns about inflation persist, which has kept gold prices under pressure since the Iran war began. So far this month, gold prices have still fallen by nearly 13%, potentially marking the largest single-month drop since October 2008. For the season to date, gold prices are still up about 5%.