Gold Finds Footing Near $4,500 as Iran War Enters Fifth Week
Gold gained for a second consecutive day as dip-buyers supported prices while the market awaited clarity on the duration of the Middle East conflict.
Bullion rose as much as 1.9% to trade above $4,500 an ounce before paring some gains, showing resilience despite a continued rise in oil prices. Investors stepped in to take advantage of cheaper gold as inflation concerns weighed on the metal.
However, traders resumed bets on rate cuts by the Federal Reserve on Monday after Chairman Jerome Powell said longer-term inflation expectations appeared to be in check, easing fears that higher oil prices would lead to monetary tightening. Higher rates are a headwind for non-yielding bullion.
Gold’s retreat pushed indicators into oversold territory last week, before prices steadied and snapped a three-week slump.
U.S. President Donald Trump reiterated threats on Monday to destroy Iranian energy assets if the Strait of Hormuz isn’t reopened soon, raising fears the war could escalate after more American troops arrived in the region. The entry into the conflict of Iran-backed Houthis last weekend signaled an escalation.
Even as Pakistan, Egypt, Saudi Arabia, and Turkey met to seek a path out of the war, Iran attacked aluminum smelters in Bahrain and the United Arab Emirates, and parts of Tehran lost electrical power after Israeli missile strikes.
The developments have raised concerns about the potential for a prolonged conflict that could lead central banks to hike interest rates to tame inflation. That, along with a liquidity squeeze in broader financial markets, has pushed gold about 14% lower since the war began at the end of February.
However, rate-hike expectations may be moderated by the risk of a sharp slowdown in an already sputtering economy. Some of the largest fund managers on Wall Street say financial markets are underestimating the risk of an economic downturn, which would ultimately push Treasury yields lower. That would reduce the opportunity cost of holding gold and make the precious metal more attractive.
Elevated central-bank buying has been a pillar of bullion’s rally over the last couple of years. Over two weeks after the start of the war, Turkey’s central bank bucked this trend as it sold and swapped about 60 tons of gold worth more than $8 billion.
“While the very short-term swings in price may be dictated by U.S. foreign policy announcements, the near-term trend still looks bearish as the price consolidates after its dramatic rally to record highs in January,” Marc Loeffert, a trader at Heraeus Precious Metals, wrote in a note.
Spot gold rose 0.2% to $4,500.94 an ounce as of 2:58 p.m. in New York. Silver climbed 0.36% to $70.01. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index was 0.2% higher.
Source : Newsmaker.id
