[New York Gold, Bonds, Dollar] Oil Prices Surge, US Treasury Yields and Dollar Strengthen... Gold Struggles to Stay Above $4000

[Mexico City = Shim Young-jae, Correspondent] The New York financial market was affected by heightened inflation concerns due to renewed military tensions between the US and Iran. As international oil prices surged amid tensions in the Strait of Hormuz, US Treasury yields rose, and the dollar strengthened. In contrast, gold, which does not yield interest, plummeted to around $4000 per ounce due to concerns over prolonged high interest rates.

On the 13th (local time), the yield on the US 10-year Treasury note rose by 0.063 percentage points to 4.624%. The dollar index increased by 0.326 points (0.32%) to 100.981. Gold prices fell by $118.900 (2.89%) to $4001.445 per ounce. The dollar-won exchange rate decreased by 1.85 won (0.12%) to 1497.02 won.

The market's flow on this day was somewhat different from the traditional risk-averse trend in geopolitics. The rise in oil prices stimulated inflation and concerns over interest rate hikes more than the demand for safe assets. Consequently, Treasury yields and the dollar rose, while gold showed weakness.

Oil Prices Surge, Inflation Concerns Rise... US 10-Year Yield Rises to 4.624%

The US Treasury market reflected concerns that rising energy prices from the Middle East could push prices higher again.

According to TradingView, the yield on the US 10-year Treasury note initially dropped to around 4.57% but then reversed course and began to rise. After increasing significantly from the morning, it surpassed 4.62% in the latter part of the day, recording 4.624%, which is 0.063 percentage points higher than the previous trading day's 4.561%.

The yield on the 2-year Treasury note also rose to its highest level since early 2025, indicating upward pressure on both short-term and long-term rates.

As the US and Iran exchanged missile and drone attacks over the weekend, reports about the actual opening of the Strait of Hormuz were mixed. President Trump announced that he would resume maritime blockades against Iran and stated that the measures would begin immediately.

As a result, Brent crude prices rose by 4.39% to $79.32 per barrel during the day and climbed to $83.30 in New York trading, nearing a daily increase of 10%. Concerns about potential supply disruptions in the Strait of Hormuz, a key route for global oil transport, led to renewed fears of inflationary pressures from energy prices.

The futures market reflected about a 30 basis point possibility of a rate hike by the US Federal Reserve (Fed) within the year. The likelihood of a rate hike in September also rose to about 71%. The market reflected the possibility that the Fed might tighten its stance again to curb rising prices in bond prices.

Joel Kruger, market strategist at LMAX Group, analyzed that "investors are considering both geopolitical uncertainties and the burden of upcoming US inflation indicators and Fed Chair testimony," adding that "both events could provide clearer direction for the market and increase volatility."

Mark Chandler, chief market strategist at Bannockburn Global Forex, assessed that given the high volatility in the Middle East situation, the likelihood of the Fed making immediate policy decisions in July is low. However, he explained that the lack of confidence in direction has led the foreign exchange market to move within a narrow range.

Dollar Index at 100.981... Safe-Haven Demand and Rising Rates Support Dollar

The dollar showed strength, reflecting tensions in the Middle East and rising US Treasury yields.

The dollar index fell to around 100.5 during the day but then rebounded sharply. The upward trend was prominent from the morning, and it approached the 101 mark in the latter part of the day. It recorded 100.981, which is 0.326 points higher than the previous trading day's 100.655.

According to Reuters, the dollar index rose by 0.04% to 101.11. After showing strength in the early part of the day alongside rising oil prices, it gave back some of its gains, but the possibility of maintaining high US rates supported the dollar's lower bound.

Major currencies showed weakness against the dollar. The euro fell by 0.1% to $1.1402, and the pound traded down 0.24% at $1.3370. The Australian dollar also declined by 0.27% to $0.6931.

The yen's weakness was even more pronounced. The dollar-yen exchange rate rose by 0.42% to 162.37 yen. Reports that the Japanese government has no immediate plans to change the asset allocation of public pensions expanded the selling pressure on the yen. As the dollar-yen rate maintained a 40-year high, the possibility of intervention by Japanese authorities in the foreign exchange market was also raised again.

Marvin Loh, senior global market strategist at State Street, assessed that there is insufficient will to execute changes in the management of Japan's pension assets. He diagnosed that unless Japan raises its policy interest rate or pushes for actual changes in asset allocation, the yen may struggle to move away from its current level.

The dollar-won exchange rate showed high volatility during the day. The exchange rate started around 1498 won and briefly rose close to 1508 won. It then sharply fell back to the 1492 won range and partially recovered some of the losses in the latter part of the day. The final exchange rate was 1497.02 won, down 1.85 won (0.12%) from the previous trading day's 1498.87 won.

Despite the rise in the dollar index, the slight decline in the dollar-won exchange rate is interpreted as a result of the influx of won buying and dollar selling near the day's high. However, with ongoing tensions in the Middle East and rising US rates, there remains the possibility of continued volatility around the 1500 won mark.

Gold Plummets 2.89%... High-Interest Burden Outweighs Safe-Haven Appeal

Gold prices fell sharply despite geopolitical conflicts.

Gold prices dropped by $118.900 (2.89%) to $4001.445 per ounce compared to the previous trading day. It fluctuated around $4080 in the early part of the day but the decline accelerated sharply. At one point, it fell to around $3990 before barely recovering the $4000 mark.

Gold fell by 2.87% on a daily basis and 2.34% over five days. The one-month return was -4.92%, and over six months, it fell by 12.73%. Year-to-date returns also recorded -7.32%. However, on a one-year basis, it has risen by 20.41%.

Compared to the all-time high of $5318 per ounce recorded in January, gold is down about 25%. The world's largest gold exchange-traded fund, GLD, is also down about 26% from its January peak, and silver prices have fallen about 50% from their early-year highs.

Conflicts in the Middle East typically serve as a buying factor for gold, but this time, the rise in oil prices has stimulated inflation and the possibility of rate hikes, leading to a contrary trend. Since gold does not pay interest, its appeal diminishes as Treasury yields and cash-like asset returns increase.

Suki Cooper, head of commodity research at Standard Chartered, explained that the perception that Middle Eastern tensions have increased the opportunity cost of holding gold has put pressure on short-term prices. With US inflation already reaching a three-year high of 4.2% in May, if energy prices continue to rise, the possibility of the Fed tightening could increase.

Akashi Toshi, head of gold strategy at State Street Investment Management, assessed that the Fed's rate decisions will have a greater impact on gold prices than temporary ceasefire interruptions. He noted that short-term military conflicts do not necessarily mean a return to past comprehensive tension and interpreted recent movements as daily volatility.

Looking ahead, the market's focus is expected to shift to the US June Consumer Price Index, which will be announced on the 14th, and the Producer Price Index to be released the following day. The testimony of Fed Chair Kevin Warsh in Congress is also seen as a key variable that will determine the direction of Treasury yields, the dollar, and gold.

If inflation comes in higher than expected, the possibility of further increases in the 10-year yield and the dollar will grow, and gold may test its support below the $4000 mark again. Conversely, if inflationary pressures ease or the Fed adopts a cautious stance on rate hikes, the sharply risen Treasury yields may partially reverse, and gold prices may attempt to rebound.

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