Gold Holds Near $4,500 as Iran War Enters Fifth Week
Gold prices found a foothold around $4,500 per troy ounce as the Iran war entered its fifth week, with dip-buying helping cushion the pressure. Gold posted its first weekly gain since the Middle East conflict began, while market participants awaited clarity on how long the war would last.
Bullion remained resilient despite rising oil prices and weaker stock markets. This suggests some investors are beginning to capitalize on the month-long gold correction, as inflation concerns mounted and the chances of interest rate cuts faded. However, price direction remains sensitive to geopolitical headlines and monetary policy expectations.
The situation on the ground signals escalation. The involvement of the Iran-backed Houthi group over the weekend broadened the spectrum of the conflict, as US troops increased in the region. While several countries—including Pakistan, Egypt, Saudi Arabia, and Turkey—struggle to find a way out, attacks continue: Iran reportedly attacked aluminum smelters in Bahrain and the United Arab Emirates, while parts of Tehran experienced power outages following Israeli missile strikes.
This series of events has raised concerns that the conflict will prolong and lead to a more stringent policy response. The market believes the combination of energy inflation, potential interest rate tightening, and liquidity pressures in other assets could prompt some central banks to sell gold. In the past month, gold is said to have fallen by around 14% since the war began in late February, influenced by deleveraging and the need for liquidity in the broader market.
However, expectations of an interest rate hike could be tempered if the risk of an economic slowdown increases. Several large fund managers believe the market is still underestimating the chance of a growth slowdown, which could put downward pressure on Treasury yields. If yields fall, the opportunity cost of holding gold decreases, and the precious metal's appeal strengthens, particularly as a hedge against uncertainty.
On the central bank side, large purchases over the past few years have been a pillar of gold's rally, but there have been signs of cracks since the conflict broke out. Turkey's central bank reportedly sold and swapped around 60 tons of gold in the first two weeks of the war. Furthermore, many gold-hoarding countries are also net energy importers; when oil is expensive, there is less room for dollars to be recycled into gold purchases.
In the latest update, spot gold rose 1.1% to US$4,541.21 per ounce in afternoon trading in Singapore. Silver rose 1.3% to US$70.70, while platinum and palladium also strengthened. The Bloomberg Dollar Index fell 0.1% after rising 0.7% last week.
Causes: Uncertainty about the duration of the Iran war, escalating attacks on energy infrastructure, rising oil prices, and shifting global interest rate expectations have created a difficult-to-chart inflation-growth mix, triggering volatility across assets, including gold.
Impact: Gold has enjoyed support from dip-buying and its safe-haven function, but remains vulnerable to two main pressures: potential policy tightening (or fewer interest rate cuts) and the risk of gold selling by central banks/energy importers to maintain currency stability and liquidity. Market focus will be on developments in the conflict, the direction of oil prices, and changes in yield expectations, which will determine whether gold can hold above US$4,500 or fall under further pressure.
Source: Newsmaker.id
