Gold heads for weekly fall as fewer Fed rate cut prospects weigh
GOLD prices fell on Friday and were on track for a weekly decline, as an overall stronger dollar and the prospect of fewer US interest rate cuts offset support from rising geopolitical risks in the Middle East.
Spot gold slipped 0.5 per cent to US$3,355.49 an ounce, as of 0245 GMT, and was down 2.2 per cent for the week so far.
US gold futures shed 1 per cent to US$3,371.80.
'Right now there's a lot of fluid situation in the Middle East that causes traders not to take any aggressive position both on the long side and the short side of the trades of the spectrum,' said Kelvin Wong, a senior market analyst, Asia Pacific at Oanda.
The conflict in the Middle East intensified on Thursday when Israel bombed Iran's nuclear sites, while Iran fired missile and drone strikes on Israel, including an overnight attack on an Israeli hospital. Neither side has signalled an exit strategy.
President Donald Trump will decide in the next two weeks whether the US will get involved in the Israel-Iran air war, the White House said on Thursday, raising pressure on Tehran to come to the negotiating table.
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Meanwhile, Trump reiterated his calls for the Federal Reserve to cut interest rates, saying the rates should be 2.5 percentage points lower.
The Fed held rates steady on Wednesday, and policymakers retained projections for two quarter-point rate cuts this year.
'Macroeconomic developments, particularly steady yields and renewed USD strength, have not supported the (gold) price,' analysts at ANZ said in a note.
'Rising inflation expectations and the Fed's cautious stance have weighed on market expectations around the number of rate cuts this year.'
The dollar was set to log its biggest weekly rise in over a month on Friday. A stronger greenback makes gold more expensive for other currency holders.
Elsewhere, spot silver slipped 1.6 per cent to US$35.82 per ounce, while palladium fell 0.7 per cent to US$1,042.92. Platinum fell 1.5 per cent to US$1,287.47, but was heading for its third straight weekly rise. REUTERS
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Straits Times
20 minutes ago
- Straits Times
What if Iran tries to close the Strait of Hormuz?
What if Iran tries to close the Strait of Hormuz? Israeli aerial bombardment has wiped out much of Iran's ballistic missile capability and decapitated its military command, but Supreme Leader Ali Khamenei has refused to stop fighting, even promising 'irreparable damage' to the US if it intervenes in the conflict in support of its staunch ally. This has stoked speculation that Iran's leadership may reach for another way to pressure its enemies to relent – blocking or effectively closing the Strait of Hormuz to shipping. This narrow waterway at the mouth of the Persian Gulf handles around a quarter of the world's oil trade. So if Iran were able to deny access to the giant tankers that ferry oil and gas to China, Europe and other major energy consuming regions, it would send oil prices shooting higher and potentially destabilise the global economy. Iran has targeted merchant ships traversing the choke point in the past, and has even threatened to block the strait. The UK issued a rare warning to mariners days before Israel began bombarding Iran, saying increased tensions in the region could impact shipping, while Frontline, one of the world's largest oil-tanker operators, said it would be more cautious about offering its vessels to haul cargoes from the Persian Gulf. Where is the Strait of Hormuz? The waterway connects the Persian Gulf to the Indian Ocean, with Iran to its north and the United Arab Emirates and Oman to the south. It is almost 161km long and 34km wide at its narrowest point, with the shipping lanes in each direction just 3km wide. Its shallow depth makes ships potentially vulnerable to mines, and the proximity to land – Iran, in particular – leaves vessels open to attack from shore-based missiles or interception by patrol boats and helicopters. The strait is essential to the global oil trade. Tankers hauled almost 16.5 million barrels per day of crude and condensate from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and Iran through the strait in 2024, according to data compiled by Bloomberg. The strait is also crucial for liquefied natural gas, or LNG, with more than one-fifth of the world's supply – mostly from Qatar – passing through during the same period. Could Iran really block the Strait of Hormuz? Iran would have no legal authority to order a halt to traffic through Hormuz, so it would need to achieve this by force or the threat of force. If its navy tried to bar entry to the strait, it would likely be met with a strong response from the US Fifth Fleet and other Western navies patrolling the area. But it could cause severe disruption without a single Iranian warship leaving port. One option would be to harry shipping with small, fast patrol boats. Or it could launch drones and fire missiles toward ships from coastal or inland sites. That could make it too risky for commercial ships to venture through. Similar tactics have been employed successfully by the Houthi militia in Yemen to disrupt traffic through the Bab el Mandeb strait leading into the Red Sea on the other side of the Arabian peninsula. The Houthis have mostly fired missiles and drones at ships after warning owners of vessels linked to the US, the UK and Israel that they will be attacked if they approach the area. A US-led force in the Red Sea is seeking to protect shipping there. But the number of ships sailing through the Red Sea and Gulf of Aden was still down about 70 per cent in June compared with the average level of 2022 and 2023, according to Clarkson Research Services, a unit of the world's largest shipbroker. This has forced vessel operators to reroute their traffic around the southern tip of Africa instead of going through the Suez Canal – a lengthier and more expensive journey for ships traveling between Asia and Europe. Closing the Strait of Hormuz would quickly hit Iran's own economy as it would prevent it from exporting its petroleum. And it would antagonise China, the biggest buyer of Iranian oil and a critical partner that has used its veto power at the UN Security Council to shield Iran from Western-led sanctions or resolutions. When has Iran disrupted shipping? Iran has used harassment of ships in the Gulf for decades to register its dissatisfaction with sanctions against it, or as leverage in disputes. In April 2024, hours before launching a drone and missile attack on Israel, Iran's Islamic Revolutionary Guard Corps seized an Israel-linked container ship near the Strait of Hormuz. Iran released the ship's crew the following month, according to trade publication Lloyd's List. Tehran claimed that the MSC Aries had violated maritime regulations, but analysts pointed to its Israeli ownership connection as a motive. When it seized a US-bound tanker in April 2023, Iran said the ship had struck another vessel. But the move appeared to be retaliation for the seizure off Malaysia's coast of a ship loaded with Iranian crude by US authorities on the grounds of sanctions violations. In May 2022, Iran seized two Greek tankers and held them for six months, presumably a response to the confiscation by Greek and US authorities of Iranian oil on a different ship. The cargo was eventually released and the Greek tankers freed. So, too, was the oil on a tanker that Iran said it impounded in January 'in retaliation for the theft of oil by the US'. Has Iran ever closed the Strait of Hormuz? Not so far. During the 1980 to 1988 war between Iraq and Iran, Iraqi forces attacked an oil export terminal at Kharg Island, northwest of the strait, in part to provoke an Iranian retaliation that would draw the US into the conflict. Afterward, in what was called the Tanker War, the two sides attacked 451 vessels between them. That significantly raised the cost of insuring tankers and helped push up oil prices. When sanctions were imposed on Iran in 2011, it threatened to close the strait, but ultimately backed off. Commodore Alireza Tangsiri, head of Iran's Islamic Revolutionary Guard Corps naval forces, said shortly before the MSC Aries seizure that Iran has the option of disrupting traffic through the Strait of Hormuz, but chooses not to. How did the US and allies respond to threats to Hormuz shipping in the past? During the Tanker War, the US Navy resorted to escorting vessels through the Gulf. In 2019, it dispatched an aircraft carrier and B-52 bombers to the region. The same year, the US started Operation Sentinel in response to Iran's disruption of shipping. Ten other nations – including the UK, Saudi Arabia, the United Arab Emirates, and Bahrain – later joined the operation, known now as the International Maritime Security Construct. Since late 2023, much of the focus on protecting shipping has switched away from the Strait of Hormuz and onto the southern Red Sea, the region's other vital waterway, and the Bab el-Mandeb Strait that connects it to the Gulf of Aden and the Indian Ocean. Attacks by the Iran-backed Houthis on shipping entering or exiting the Red Sea became a greater concern than the Strait of Hormuz. Who relies most on the Strait of Hormuz? Saudi Arabia exports the most oil through the Strait of Hormuz, though it can divert shipments to Europe by using a 1200km pipeline across the kingdom to a terminal on the Red Sea, allowing it to avoid both the Strait of Hormuz and the southern Red Sea. The UAE can export some of its crude without relying on the strait, by sending 1.5 million barrels a day via a pipeline from its oil fields to the port of Fujairah on the Gulf of Oman to the south of Hormuz. With its oil pipeline to the Mediterranean closed, all of Iraq's oil exports are currently shipped by sea from the port of Basra, passing through the strait, making it highly reliant on free passage. Kuwait, Qatar and Bahrain have no option but to ship their oil through the waterway. Most of the oil passing through the Strait of Hormuz heads to Asia. Iran also depends on transit through the Strait of Hormuz for its oil exports. It has an export terminal at Jask, at the eastern end of the strait, which was officially opened in July 2021. The facility offers Tehran a means to get a little of its oil into the world without using the waterway and its storage tanks were slowly being filled with crude late last year. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
an hour ago
- Straits Times
Strait of Hormuz tracker: Fewer ships seen entering oil chokepoint
An oil tanker passing through the Strait of Hormuz. Such ships make up the bulk of traffic through the Strait. PHOTO: REUTERS Fewer commercial vessels appear to be entering the Strait of Hormuz, a vital chokepoint for energy exports from the Persian Gulf to the world, as Israel's attack on Iran – and signs the US may join it – bring unease to the shipping industry. Importantly, oil tanker arrivals appear more normal. A five-day rolling average of vessels above 10,000 deadweight tons reveals a decline in ships sailing through the Strait into the Gulf since Israel and Iran started exchanging missile strikes a week ago, according to vessel-tracking data compiled by Bloomberg. The drop was led by container ships and bulk carriers. Departures from the sea are just above usual norms. It is too early to draw definitive conclusions from the data, which are volatile at the best of times, but they offer a tentative idea that vessel owners might be steering clear of the conflict-ridden region. Of the ships entering, oil tankers are showing little impact so far, with about 40 to 44 of the vessels still sailing through the space in both directions. The ships account for bulk of the traffic through the Strait, with more than a quarter of the world's oil shipped through the waterway between Iran and Oman. Movements by liquefied petroleum gas and liquefied natural gas tankers also remain close to the usual combined total of seven to nine ships a day. While Iran has threatened repeatedly to close the Strait in times of heightened geopolitical tensions, the government in Tehran relies heavily on the route for its own oil and gas exports and revenues. Still, traders will be watching closely for any impact on traffic should US President Donald Trump decide to get his country's forces into the conflict. Overall, daily transits through the waterway remain within typical ranges, with most loading and discharge activities proceeding as planned. To be clear, it takes time to parse trends from data on shipping traffic. Cargo-loading schedules, the weather and other things can influence vessel movements and the snapshot covers a relatively short timespan. In addition, electronic interference affecting navigational signals in the region may be impacting the results. While physical traffic isn't blocked, high freight rates for vessels transiting the region reflects the wariness of shipowners amid the sharply increased perceived risk. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
2 hours ago
- Straits Times
Chinese exports of rare-earth magnets plummet in May
Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province. PHOTO: REUTERS Chinese exports of rare-earth magnets plummet in May BEIJING - Chinese exports of rare-earth magnets continued their downward slide in May, official data showed on June 20, reflecting restrictions imposed by Beijing during its trade war with the United States. China is the world's leading producer of rare earths, used to make magnets essential to the automotive, electronics and defence industries. Since April, Beijing has required traders to obtain licences before they export the strategic materials, a move seen as retaliation for US curbs on the import of Chinese goods. Many manufacturers, particularly in the automotive sector, have bewailed what they view as sporadic licence issuances. And Chinese customs data revealed on June 20 that the country's rare-earth magnet exports plummeted by 70 per cent year-on-year in May, following an initial slowdown observed in April. Exports fell below the US$60 million (S$77 million) mark, hitting their lowest level since 2015 excluding the Covid-19 pandemic, according to Bloomberg News. After talks between China and the US in London in June, Beijing said it had issued a 'certain number' of export licences for rare earths. US President Donald Trump said last week on his Truth Social platform that 'any necessary rare earths... will be supplied, up front, by China'. Beijing also said it would launch a 'green channel' to facilitate rare earth exports to the European Union. But its exports of rare-earth magnets to the EU in May plunged by 81 per cent year-on-year, according to the customs figures. And exports of small parcels to the US dropped by half compared to the previous month. In May, Washington ended a tariff exemption previously enjoyed by low-value parcels shipped from China and Hong Kong. The measure dealt a severe blow to platforms shipping low-cost items from China, such as Shein and Temu. The decline was offset by a rise in China's total small parcel exports to the rest of the world, which were up 40 per cent year-on-year, with particularly notable increases to Singapore, Russia, Europe and Australia. Besides the US, several countries have been trying to limit the rise of platforms sending cheap products made in China. In June, France adopted a Bill that aims to curb fast fashion by banning advertising and imposing an additional tax on small parcels. AFP Join ST's Telegram channel and get the latest breaking news delivered to you.
