Bullion is seen to still maintain its horizontal trend at $4,445 as further negotiations on the US-Iran conflict face prolonged uncertainty and market players are now paying important attention to the Core Personal Consumer Expenditure Price Index (Core PCE) report at 8.30 tonight (Thursday).
Gold prices are trading at $4,446, down 0.23% since it opened in early trading on Thursday in the Asian session.
Gold prices continued to decline for two consecutive days as the market continues to pay attention to the development of the Iran conflict and the direction of US interest rates.
Market sentiment remains cautious following US President Donald Trump's statement that he is still not satisfied with the progress of negotiations with Iran.
This situation has reduced investor confidence that the conflict can be resolved in the near future. At the same time, uncertainty about the security of trade routes in the Strait of Hormuz has also added pressure to global markets.
The Strait of Hormuz is a vital route for global energy supplies and any disruption in the area has the potential to trigger a surge in global oil prices.
Rising energy costs are seen as increasing inflationary pressures and forcing major central banks to keep interest rates high for longer than initially expected.
A high interest rate environment typically puts pressure on gold because the asset does not offer interest returns. This factor has limited investor interest in gold compared to other higher-yielding assets.
US Federal Reserve (Fed) Governor Lisa Cook also warned that inflation is still moving in a worrying direction and the Fed is prepared to raise interest rates if price pressures continue to increase.
Since the Iran conflict erupted in late February, gold prices have fallen by more than 15%. The surge in energy costs due to tensions in the Strait of Hormuz has also made global central banks more cautious about implementing interest rate cuts.
Now, the main focus of the market is on US Personal Consumption Expenditure (PCE) inflation data to be released later today.
The core PCE Price Index is expected to rise to 3.8% year-on-year in April from 3.5% previously, while core PCE is projected to rise to 3.3% from 3.2%.
If US inflation data shows a higher-than-expected reading, it could potentially reinforce expectations that the Fed will keep interest rates high or implement additional hikes this year.
While gold is often considered a safe haven during times of geopolitical uncertainty, the prospect of high interest rates continues to be a key factor limiting the precious metal's price gains.
