On Thursday, gold prices fell approximately 1.6%, reaching $4,385.85 an ounce, marking their lowest level since March 26. This decline is attributed to a stronger U.S. dollar, which makes gold more expensive for foreign buyers, and rising oil prices driven by ongoing tensions in the Middle East.
UBS strategists maintain a bullish outlook on gold, despite reducing their year-end price target from $5,900 to $5,500 an ounce, citing potential recovery as expectations for interest rate hikes ease. Bank of America also raised its year-end target to $5,093, indicating a 16% increase from current levels, while acknowledging risks from a stronger dollar and rising real interest rates.
Analysts note that the prolonged conflict in the Middle East is exacerbating inflation fears, which traditionally diminish gold's appeal as an inflation hedge, especially as interest rates are expected to rise. The market is also reacting to higher government bond yields and concerns about elevated energy prices impacting broader inflation.
Silver and other precious metals are experiencing similar downward pressure, with silver prices dropping 2.4% to $72.85 an ounce. The upcoming U.S. personal consumption expenditure price index reading is anticipated to provide further insights into inflation trends, with economists predicting a month-over-month increase of 0.5% and a year-over-year rise of 3.8%