(Bloomberg) — Gold resumed declines as traders focused on the prospect of prolonged energy-market tightness despite Israel and Iran agreeing to end attacks and as some investors reacted to negative technical signals.
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Bullion fell below $4,300 an ounce, on pace for its second decline in three days, as the US dollar pared losses. Most precious metals resumed a pullback even after Israel and Iran pledged to stop missile strikes following an appeal by US President Donald Trump for de-escalation as he seeks a resolution to the wider conflict that’s roiled global markets.
The war has disrupted energy flows via the Strait of Hormuz, driven oil prices higher and raised concerns about global inflation, making central banks more likely to keep interest rates steady or raise them, which is a headwind for precious metals. Gold is now 19% lower than where it was trading before the Iran war broke out at the end of February.
Gold’s recent decline through its 200-day moving average — a widely watched measure of long-term momentum — has triggered additional selling as it is seen as an important level watched by institutional investors.
“The prevailing inflation fears, data strength, Fed hike probability increasing and break of 200-day moving average have led to a heavy skew negative,” said Ryan McKay, senior commodity strategist at TD Securities.
Meanwhile, Citigroup Inc. lowered its three-month target for gold to $4,000 an ounce from $4,300, citing the likelihood of a Fed rate hike this year, though kept its six- to 12-month price target at $5,000 an ounce.
“Longer term, we maintain a bullish gold view, but we believe it is extremely high-risk in the near term for anyone without very wide stops and longer-term investment horizons,” analysts including Kenny Hu said in a Monday note.
Spot gold was down 1.3% to $4,275.21 an ounce at 11:58 a.m. in New York. Silver sank 4.2%. Platinum fell and palladium rose. The Bloomberg Dollar Spot Index, a gauge of the US currency, recovered some of the ground lost earlier Tuesday to edge 0.1% lower.
–With assistance from Jack Ryan.
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