Gold Heads for First Weekly Gain Since Middle East War Begins
Gold prices are recovering and are poised to post their first weekly gain since the US-Israel war against Iran began, as bargain hunting intensifies after a decline in prices in recent weeks. On Friday, gold rose as much as 4.1% to reach $4,550/oz, recouping the previous session's losses.
This recovery comes after gold was under pressure in recent weeks, when the conflict drove oil prices up and fueled inflation concerns, raising the prospect of the Fed keeping interest rates high—and even opening the door to tightening—which is a drag on gold because it offers no yield.
Despite the strengthening, bearish pressure has not completely dissipated. Doubts about the possibility of a ceasefire remain high amid the latest escalation: the US and Israel reportedly attacked Iran's nuclear and steel facilities, while Tehran retaliated in the Persian Gulf region. These tensions weighed on market sentiment and lifted oil prices again. The move came after Trump promised to hold off on attacks on Iranian energy sites for an additional 10 days—providing a brief respite that allowed gold to breathe.
Since the war began on February 28, gold has fallen nearly 15%, tending to move in the same direction as stocks and in the opposite direction to oil. TD Securities analysts believe gold is now "trading more like a risk asset" than a pure safe haven.
Additional pressure is coming from central banks. Turkey's central bank reportedly sold and swapped around 60 tons of gold in two weeks (worth over $8 billion). Central bank purchases over the past few years have been a pillar of the gold rally. If other monetary institutions follow Turkey's lead, the pace of purchases could slow and the long-standing assumption—that central banks are reluctant to sell gold—would begin to be questioned.
Daniel Ghali, senior commodity strategist at TD Securities, said the conflict has caused significant economic damage to Middle Eastern countries—some of which are official sector gold buyers. He believes the selling trend could be more widespread in energy-importing countries, as energy cost shocks could reduce the ability to buy gold or even force some central banks to sell reserves to meet dollar-based obligations.
On the logistics front, the Strait of Hormuz—a vital waterway for about a fifth of global oil and gas shipments, as well as the flow of food, metals, and other commodities—remains largely closed as the war approaches its one-month mark, keeping market volatility high.
At the last update, spot gold rose 3.2% to $4,515.26/oz at 3:58 p.m. New York time. Silver strengthened 2.7% to near $70, while platinum and palladium also rose. The Bloomberg Dollar Spot Index rose 0.2% after closing up 0.4% in the previous session.
Source: Newsmaker.id
