Gold Rebounds, War Risks Still Loom
Gold prices rose on Wednesday (March 4), recovering some of the previous session's losses as buyers stepped in during the fifth day of conflict in the Middle East. Spot gold rose 1.2% to US$5,152.09 per ounce at 10:09 a.m. New York time, while silver rose 2.3% to US$83.92 after falling more than 8% the previous day.
Gold briefly rose as much as 2.3%, regaining ground after its four-day rally stalled on Tuesday. The market balanced geopolitical risk premiums with macro-restraining factors, including the dollar, which had strengthened earlier in the week before weakening slightly.
Rising energy prices due to the conflict prompted market participants to reduce bets on monetary easing, a dynamic that is generally a drag on gold because it does not provide a yield. At the same time, a broad sell-off in the stock market on Tuesday forced some investors to liquidate gold positions to meet margin requirements in other portfolios, adding to short-term volatility.
BMO Capital Markets considers gold's weakness on Tuesday "questionable" after initially benefiting from safe-haven demand, with pressure coming from surging bond yields due to inflation concerns, a strong dollar, and forced liquidations. CFTC data also shows that fund managers' net-long positions have declined since late January to near a decade-low, which is considered to limit room for further declines.
Looking ahead, gold's direction will be determined by the tug-of-war between war risk premiums and the path of interest rates. While energy inflation risks holding back interest rate cuts for longer, the market is also monitoring whether stabilization of extreme conditions could reduce the need for hedging. The focus remains on conflict dynamics, yield and dollar movements, and developments in energy flows through the Strait of Hormuz, which influence global inflation expectations.
Source: Newsmaker.id
