Market Volatility: Gold Declines and Oil Rises Amid Economic and Political Changes

Global markets are experiencing mixed movements,
with gold declining due to profit-taking after reaching a record high,
while oil prices are rising following new U.S. sanctions on Iran.
This reflects the impact of economic and political factors on key assets.

Content

Gold
Oil

Gold

Gold Prices Decline Due to Profit-Taking After Reaching a Record High

Gold prices dropped as investors took profits after the precious metal reached a new record high.
The spot price of gold fell by 0.5% to $2,937.65 per ounce, after peaking at $2,956.19 per ounce on Monday,
driven by expectations of a Federal Reserve interest rate cut and increased demand for gold as a safe-haven asset.

This decline comes amid shifting expectations regarding U.S. monetary policy,
as markets now anticipate a delayed rate cut compared to forecasts from just a week ago,
which enhances gold’s appeal as a non-yielding asset.

On the geopolitical front, the administration of U.S. President Donald Trump has escalated tensions
with China through new measures related to investment and trade,
increasing risks for relations between the two nations.
Gold also received additional support from declining U.S. government bond yields following strong demand in a two-year bond auction,
coinciding with weak economic activity data from last week.

Exchange-traded funds (ETFs) backed by gold also saw strong inflows, recording their highest net purchases since 2022,
helping the metal gain more than 12% since the beginning of the year.

Investors are now focusing on the Core Personal Consumption Expenditures (PCE) Price Index,
set to be released on Friday, which may provide new insights into the Federal Reserve’s monetary policy outlook.

As of 12:18 PM Singapore time, spot gold prices settled at $2,937.65 per ounce, down 0.5%,
while the Bloomberg Dollar Spot Index declined by 0.1%. Silver remained unchanged,
while both platinum and palladium saw slight declines.

Oil

Oil Prices Rise Following New U.S. Sanctions on Iran

Oil prices rose for the second consecutive session after the United States imposed new sanctions targeting Iranian oil exports,
marking a return to Washington’s “maximum pressure” strategy against Tehran.

West Texas Intermediate (WTI) crude rose to $71 per barrel, after gaining 0.4% on Monday, while Brent crude neared $75 per barrel.

The U.S. sanctions affected 22 individuals and 13 vessels, which Washington claimed were involved in illegal Iranian oil shipments.
The targeted entities are located in Iran, the UAE, Hong Kong, India, and China.

Market Volatility and Supply Challenges

Oil prices have experienced a volatile start to the year, initially rising due to cold weather and a previous round of U.S. sanctions
but later facing downward pressure due to concerns over tariffs imposed by the Trump administration.
In a press conference, the U.S. President confirmed that tariffs on Canada and Mexico would proceed as planned,
which could impact oil shipments and increase transportation costs.

In addition to sanctions, the market faces other supply-related challenges.
Investors widely expect the OPEC+ alliance to postpone production hikes once again.
Meanwhile, Iraq is seeking to resume oil flows through the Kurdistan pipeline,
and ongoing negotiations to end the war in Ukraine could impact Russian oil exports.

In London, the International Energy Week Conference is set to begin on Tuesday, where Fatih Birol,
head of the International Energy Agency (IEA), along with top executives from leading energy companies,
will discuss the future outlook for oil markets.

Market Volatility: Gold Declines and Oil Rises Amid Economic and Political Changes

Market Volatility: Gold Declines and Oil Rises Amid Economic and Political Changes

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