Gold Trapped! Now the Market Calculates Inflation Risk
Gold prices have been stable within a narrow range, as market participants weigh the inflation risks stemming from wars in the Middle East against efforts to mitigate oil supply shocks. Uncertainty about inflation and interest rates has kept gold's movement subdued, although demand for hedging remains supportive.
Gold briefly rose as much as 0.5% and held above US$5,000 per ounce, after falling 0.3% in the previous session. Meanwhile, oil prices rebounded after their first correction in nearly a week, as Iran escalated attacks on energy infrastructure and the US prepared to release the initial tranche of its emergency crude oil reserves.
US President Donald Trump again called on other countries to help secure the Strait of Hormuz, where transit flows remain nearly halted. The US-Israel conflict with Iran, which is entering its third week, has kept energy risk premiums high and heightened inflation concerns.
Rising energy prices have also eroded the chances of an imminent interest rate cut. The market now sees little chance of the Fed lowering rates at this week's meeting, and high interest rates are typically a limiting factor for gold because they offer no yield.
Despite this, gold is still up around 16% year-to-date, supported by geopolitical tensions and concerns about the Fed's independence, which have maintained demand for safe-haven assets. The upward momentum has slowed since the outbreak of the war on February 28, but concerns about stagflation—slowing growth with high inflation—are considered to remain supportive of gold in the long term.
On the demand side, buying interest in China is said to remain strong. Inflows into gold ETFs have been occurring daily since investors returned from the Lunar New Year holiday on February 24, with an additional accumulation exceeding 17 billion yuan, according to Bloomberg calculations. While the Shanghai premium over global prices indicates solid demand.
Spot gold rose 0.4% to US$5,026.75 per ounce at 12:20 PM Singapore time. Silver rose 0.9% to US$81.50, while platinum and palladium also strengthened; the Bloomberg Dollar Index rose 0.1% after falling 0.6% on Monday. (asd)
Source: Newsmaker.id
