Gold Rises as Dip-Buyers Step In Despite Dollar Strength
Gold edged higher on Wednesday, recovering part of the previous session’s losses as dip-buyers re-entered a market still dominated by risk on the fifth day of the Middle East war.
The U.S. signaled it would push deeper into Iran, saying the country’s military capabilities are “evaporating.” The conflict has widened, with more countries drawn in as Tehran targets Israel and Gulf states while Israeli and U.S. forces strike sites inside the Islamic Republic. The U.S. also said it sank an Iranian warship in international waters, and Turkey was reported to have come under fire.
Iran, meanwhile, dismissed reports that it had reached out to the U.S. to negotiate an end to the conflict, calling the claim a “pure falsehood.”
Bullion rose as much as 2.3% before trimming gains, helped by some softness in the dollar after an early-week rally. Still, broader cross-asset conditions remain volatile, with inflation concerns linked to higher energy prices keeping rates—and yields—on traders’ radar.
According to Peter Kinsella, global head of FX strategy at Union Bancaire Privee (UBP SA), a sharp pullback in bullish positioning by hedge funds and money managers “should limit the extent of any down move” in gold. Data from the CFTC show investors’ net-long position in gold has fallen toward its lowest level in nearly a decade.
Gold is still up close to 20% this year and hit an all-time high above $5,595 an ounce in late January, supported by persistent geopolitical and trade tensions, along with concerns about the Federal Reserve’s independence. Kinsella said he expects gold to recover further, arguing the longer-term drivers remain intact and that an inconclusive outcome to the war would underscore geopolitical risk more than before.
However, surging energy prices are reviving inflation risks, which could cap bullion’s upside if the Fed and other central banks keep rates higher for longer—or even tighten further. Traders now see roughly an 80% chance of more than one quarter-point Fed cut this year, down from fully pricing in two cuts as recently as Friday. Higher borrowing costs are typically a headwind for non-yielding precious metals.
Gold is often viewed as an inflation hedge, but as George Cheveley, a portfolio manager at Ninety One, noted, it may be better described as a hedge against extremes: it tends to perform in high inflation and in deflation, while a stable macro environment is usually less supportive.
Source : Newsmaker.id
