Gold Rebounds, Dollar and Yields Limit Gains
Gold prices rose on Wednesday (March 4), recovering some of the previous session's losses, as dip-buying entered a market still clouded by uncertainty following the fifth day of war in the Middle East. Bullion briefly rose as much as 2%, after a four-day rally stalled on Tuesday.
Gold's gains occurred amid a tug-of-war between geopolitical risk premiums and macroeconomic restraints. The US dollar strengthened by around 1.5% this week, while rising bond yields and surging energy prices raised broader inflation risks. These conditions prompted market participants to reduce expectations for monetary easing, amid concerns that price pressures could force central banks to hold interest rates longer.
Pressure in risk assets also shaped gold's dynamics. The broad sell-off in the stock market on Tuesday forced some investors to liquidate positions to meet margin calls in other portfolios, which, at certain times, could increase volatility and impact gold inflows and outflows.
Peter Kinsella, global head of forex strategy at Union Bancaire Privée (UBP SA), believes this movement is consistent with the "portfolio risk-reduction move" pattern that typically occurs during times of conflict. He also highlighted Commodity Futures Trading Commission (CFTC) data showing asset managers' net long positions have declined since late January, approaching a decade-low, which he believes could limit the risk of further downside.
Year-to-date, gold has strengthened nearly 20% and briefly reached a record high of $5,597 per ounce in late January, supported by geopolitical and trade tensions, as well as concerns about the Federal Reserve's independence. However, the escalation of the US-Israel war against Iran remains a major source of uncertainty, while energy inflation risks limiting upside room if interest rate expectations shift again toward a hawkish trend.
Market participants now estimate an 80% chance of more than one Fed rate cut this year, down from last week when two cuts were fully priced in. Higher interest rates are a drag on precious metals because they provide no yield.
In the physical market, spot gold rose about 1.6% to $5,175.89 an ounce as of 9:20 a.m. London time. Silver jumped 4.1% to $85.38 after falling more than 8% in the previous session, while platinum and palladium also gained.
Source: Newsmaker.id
