Gold Under Fed Pressure Despite Geopolitical Risks

Global markets remain fixated on the hawkish stance of the US Federal Reserve, overshadowing escalating geopolitical tensions in the Middle East. Under this pressure, gold is maintaining its downward trajectory as safe-haven demand weakens. While investors withdraw from the precious metal amid rising inflation fears and climbing bond yields, a gradual reduction in risk appetite is observed across the markets.

Geopolitical Risks and Gold Valuation

Although tensions between the US and Iran and the risk of conflict in the Strait of Hormuz dampen risk appetite, gram gold is struggling to find support. A selling trend prevails in line with the decline in ounce prices.

■Gram gold started the day with a 0.3% decline at the 6,135 lira level.

■Quarter gold is finding buyers at 10,072 lira, while Republican gold trades at 40,134 lira.

■Ounce gold fell by 0.5% to $2,029 under the influence of a strong dollar and rising bond yields.

Energy Crunch and Central Bank Pressure

The sharp rise in oil prices is reviving inflation fears, reinforcing expectations that central banks will continue to wield the interest rate weapon. This situation exacerbates the pressure on non-yielding assets like gold.

■Brent crude rose 4.7% yesterday to $94.9 per barrel, marking its highest level since June.

■Markets are pricing in a 78% probability that the Fed will raise rates 2 times by the end of the year.

■The US 10-year bond yield is balancing at 4.71%, while the dollar index trades flat at 101.5 points.

From a portfolio perspective, the primary pressure on gold stems from "opportunity cost." The scenario where the Fed continues to hike rates creates a negative environment for non-yielding assets. However, the 4.7% surge in oil prices holds hedging potential for energy equities and commodity-based assets. Long-term value investors can shield themselves from this interest rate environment by pivoting towards cash flow (dividend) generating companies as volatility increases.