Gold price (XAU/USD) remains under selling pressure near $4,640 during the early Asian session on Friday, extending its decline as soaring crude oil and energy prices—driven by the escalating US-Israeli war with Iran—reignite inflation fears [1]. The US Federal Reserve left interest rates unchanged on Wednesday and expressed concern about the impact of rising oil prices on inflation, with Fed Chair Jerome Powell stating that the possibility of a rate hike has come up in policy committee discussions [1]. Hawkish remarks from Fed officials have lifted the US Dollar (USD), weighing on the USD-denominated commodity price [1].
Traders have been selling liquid assets like gold to cover margin calls and raise cash during broader market volatility. Paul Surguy, managing director and head of investment management and proposition at Kingswood Group, commented, 'Global markets have seen broad selloffs as investors search for the quickest assets to sell. Perhaps we are now seeing the next leg of this phase where the perceived safe haven assets are sold to fund purchases of those that may have overreacted to the current situation' [1].
Despite the current selling pressure, rising geopolitical risks could boost traditional safe-haven assets such as gold. Iranian Foreign Minister Abbas Araghchi vowed to show 'ZERO restraint' if the country’s energy infrastructure were hit again, according to Bloomberg. Meanwhile, Saudi Foreign Minister Faisal bin Farhan Al Saud warned that the kingdom’s restraint isn’t 'unlimited' and added it could take military action [1].
Central banks remain significant buyers of gold, with emerging economies such as China, India, and Turkey quickly increasing their gold reserves. In 2022, central banks added 1,136 tonnes of gold worth around $70 billion to their reserves, marking the highest yearly purchase since records began, according to data from the World Gold Council [1].
CONCLUSION
Gold has fallen below $4,650 as inflation fears and liquidity concerns drive selling pressure, despite its traditional role as a safe-haven asset. Hawkish Fed commentary and geopolitical tensions are contributing to market volatility, with central banks continuing to accumulate gold. The market remains highly sensitive to developments in the Middle East and US monetary policy.