Gold Rises, Market Welcomes Talk of Global Oil Stock Release
Gold prices continued their rise and broke through US$5,200 per troy ounce after reports emerged that the International Energy Agency (IEA) is proposing the largest oil stock release in history. This move is seen as an effort to ease the energy supply shock caused by the war in the Middle East. At the same time, oil prices lost some of their previous gains, while the US dollar weakened slightly, providing additional support for bullion.
The report stated that the IEA's proposed oil stock release could exceed 182 million barrels, larger than the intervention undertaken after Russia's invasion of Ukraine in 2022. However, behind this sentiment, the market remains clouded by geopolitical uncertainty. The US-Israel conflict with Iran has entered its 12th day, and investors continue to digest conflicting statements from US officials. The White House denied that the US had escorted oil tankers through the Strait of Hormuz, contradicting a later-deleted post by Energy Secretary Chris Wright. This is despite the fact that about one-fifth of the world's oil and liquefied natural gas supplies normally pass through this route.
For gold, the severe turmoil in energy markets has reignited inflation concerns. This has led market participants to reduce expectations of interest rate cuts by the Federal Reserve and other central banks, something that is usually a drag on the precious metal because it offers no yield. Despite this, gold has still risen by about a fifth this year and remains seen as a liquid asset that can support portfolios when other markets are depressed. Physical demand, particularly from Asia, is also seen as a buffer as prices approach the US$5,000 area.
On the other hand, pressure has come from selling by investors using gold to cover losses in other assets. Gold holdings in exchange-traded funds even fell by almost 30 tons last week, the largest weekly sell-off in more than two years. Nevertheless, many investors still find gold attractive to buy when prices are weak, especially as wars continue to disrupt oil production and processing in the Middle East. With the market also awaiting US inflation data, gold's future direction will be largely determined by a combination of war developments, dollar movements, and expectations for the Fed's interest rate. (asd)
Source: Newsmaker.id
