Gold Rebounds, Safe-Haven Demand Rises Amid Conflict
Gold prices (XAU/USD) recovered some losses and edged up to around US$4,725 at the start of Friday's European session, halting seven consecutive days of declines. This recovery occurred as the US-Iran conflict maintained demand for safe-haven assets, although market participants remained cautious amid high volatility.
Major support came from rising geopolitical risks. Iranian Foreign Minister Abbas Araghchi vowed to show "zero tolerance" if Iran's energy infrastructure is attacked again, while Saudi Arabia signaled that restraint would not be indefinite and left open the option of military action. This combination of threats and responses kept the market closely monitoring the risk of escalation, which could suddenly increase hedging demand.
However, gold's upside remained limited by concerns about energy inflation. The surge in oil prices due to the war has revived inflation risks, potentially delaying interest rate cuts and reducing the appeal of non-yielding gold. In the US, the Fed held interest rates on hold but highlighted the impact of rising oil prices on inflation; Jerome Powell even mentioned that the option of a rate hike was on the table. This hawkish tone supported the US dollar and acted as a brake on USD-denominated commodities.
Liquidity factors also contributed to the pressure. Amid the broader sell-off, some market participants sold the most liquid assets, including gold, to meet margin calls and increase cash. Comments by Paul Surguy (Kingswood Group) confirm this pattern: when volatility increases, safe-haven assets can also be sold to finance portfolio repositioning.
Market participants should monitor:
oil direction (energy inflation risk),
DXY movements and Treasury yields (the main brakes on gold),
conflict headlines and attacks on energy infrastructure,
any further signs of margin calls/liquidity that could trigger further forced selling. (CP)
Source: Newsmaker.id
