Gold prices edged lower on Wednesday morning, with spot gold trading at $4,128.86 per ounce as of 9:10am UAE time, down 0.43 per cent. Silver also declined, falling around 0.75 per cent to trade at $60.45 per ounce.
The precious metals markets remained focused on developments in the Middle East after Iran launched strikes on key US military sites in neighbouring Bahrain and Kuwait, while the US carried out retaliatory strikes in southern Iran following disruptions to commercial vessels in the Strait of Hormuz.
Analysts said investors were also closely watching the US Federal Reserve’s interest rate outlook, with monetary policy expected to play a key role in determining demand for gold and silver.
Carsten Menke, Head of Next Generation Research at Julius Baer, said precious metals had recovered some of their recent losses following a weaker-than-expected US labour market report.
“The outlook for US monetary policy is instrumental as it drives the buying and selling of gold by Western world investors,” Menke said.
He expects gold prices to regain lost ground over the longer term, although record highs remain unlikely in the near future. However, he said the outlook for silver was less certain due to the impact of recent speculative trading activity.
Menke added that Julius Baer’s view on US monetary policy remained unchanged, with the bank not expecting the Federal Reserve to raise interest rates, as some inflationary pressures are likely to prove temporary. He also expects further weakness in the US dollar, though less than previously anticipated.
“Record highs remain out of reach for now, but we expect prices to regain lost ground in the longer term and reiterate our constructive view on gold,” Menke said, while maintaining a neutral outlook on silver.