International gold prices 2.72% plunged following the announcement of a U.S. military blockade in the Iranian region.
International gold prices dropped 2.72% due to the announcement of a complete blockade in the Iranian region by the U.S. military and hawkish comments from Federal Reserve officials. The surge in bond yields immediately affects gold holders and gold-linked products.
As a representative of safe assets, gold prices fell by 2.72% in just one day. With the announcement of the Iranian region's blockade and the hawkish statements from U.S. central bank officials, investors need to readjust their portfolio defense strategies. Investors holding gold as a safe asset need to clearly identify the causes of the price fluctuations to avoid increasing their losses.
On 7 month 13 day, at 2:23 PM Eastern Time, gold futures for 8 month delivery traded down from 4,113.70 dollars to 111.80 dollars. COMEX is a metals futures exchange under the Chicago Mercantile Exchange (CME) and serves as a standard for gold prices worldwide.
The day’s price closed at 4,001.90 dollars per troy ounce. A troy ounce is a unit used for trading precious metals, equivalent to 31.10 grams.
The plunge in gold prices was triggered by a single announcement from the United States. The U.S. military announced that it would reimpose a total blockade in the Iranian waters.
This announcement caused U.S. Treasury bond yields to soar. When investment opportunities are restricted, the first thing to react is bond yields. There was a rush in the market betting that the U.S. benchmark interest rate would rise further. Key Federal Reserve officials also made hawkish comments, stating that "interest rates need to be increased further."
When interest rates rise, gold prices fall. Since gold is a non-yielding asset, when bank deposits or Treasury bond yields increase, money flows out of gold.
The movements of the day were not limited to Comex futures. They were immediately reflected in the spot gold prices and relevant derivatives. For investors holding gold-related ETFs or gold mining stocks, it is time to check their positions and product prices.
Geopolitical risks tend to push gold prices up, but rising interest rate pressures suppress them. The price drop on that day, which involved two opposing forces, ultimately indicates that concerns over rate hikes prevailed. It was a day that made us question whether gold is a safe asset or merely an asset driven by interest rates.
Sources: 연합인포맥스
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