Gold investors are slashing their long positions as escalating oil prices from US-Iran tensions threaten to derail recent disinflation gains, according to commodity strategists at TD Securities led by Bart Melek. The precious metal’s upside remains capped by persistent dollar strength and mounting concerns about Federal Reserve policy risks. Higher energy costs stemming from Middle East geopolitical instability could reignite inflationary pressures, potentially forcing the Fed to maintain restrictive monetary policy longer than markets currently anticipate. This scenario supports continued dollar dominance while diminishing gold’s appeal as haven flows compete with rising real yields. The repositioning reflects growing uncertainty among bullion traders about the inflation trajectory and timing of Fed rate cuts that had previously supported gold’s rally.
FXnCO Insight
Traders should monitor crude oil breakouts above key resistance levels and upcoming inflation data closely, as further energy price surges could trigger additional long liquidation in gold while strengthening dollar positioning across G10 pairs.
Source: FXStreet