Energy Price Spikes Erase Interest Rate Cut Expectations for Gold Holders

Spot gold fell to $4,694.30 per ounce, its lowest level since April 7. The decline follows a shift in interest rate expectations that has eroded the demand for the non-yielding metal. Traders now see little chance of a Federal Reserve interest rate cut this year, a reversal from the previous expectation of two cuts. This shift stems from oil prices jumping above $100 a barrel and a surge in natural gas prices. These energy price spikes followed the failure of US-Iran peace talks in Islamabad and the US military's announcement of a blockade of the Strait of Hormuz, a maritime chokepoint through which approximately 21% of globally traded petroleum passes annually. The resulting inflation concerns limit the scope for monetary easing and increase the opportunity cost of holding gold. Spot gold has fallen more than 11% since the US-Israeli war on Iran began on February 28.