Gold Strengthens, Safe-Haven Sought as Iran Conflict Continues
Gold prices (XAU/USD) continued their gains for the second consecutive session on Thursday (March 5) at the time of writing, with spot gold trading at $5,190 per ounce, supported by demand for safe-haven assets amid the ongoing war in the Middle East. The conflict in Iran entered its sixth day, with US and Israeli attacks on Iranian territory and a widespread Iranian retaliation using missiles and drones targeting various points in the region, including regional targets and military sites. The prolongation of the crisis has heightened geopolitical uncertainty and pushed investors back into safe-haven assets.
Tensions also escalated after reports that a US submarine sank an Iranian warship off the coast of Sri Lanka. US Secretary of Defense Pete Hegseth called the incident "the first such attack on an enemy since World War II," reinforcing the perception that escalation remains open and the risk of a prolonged conflict has not disappeared.
Currency-wise, dollar-denominated gold received additional support as the US dollar weakened amid waning hopes that the Middle East conflict could be shorter than feared. A weaker dollar makes gold cheaper for non-USD buyers, which typically boosts both physical and investment demand. However, uncertainty about the duration of the conflict remains high after Reuters cited a New York Times report that Iran signaled to the CIA to explore negotiations to end the war, which Tehran later denied.
US trade policy is also a concern. The US is reportedly preparing to introduce temporary 15% global tariffs this week, replacing the 10% tariffs imposed after the Supreme Court overturned most of President Donald Trump's previous levies. Treasury Secretary Scott Bessent stated that tariffs could return to their previous levels within five months as new trade investigations progress, adding another layer of uncertainty to the inflation and growth outlook.
Despite strong safe-haven demand, gold's upside is potentially limited by resurgent inflation concerns stemming from surging oil and gas prices. Such inflationary pressures could prompt the market to delay expectations of a Federal Reserve interest rate cut, a dynamic that is typically unfavorable for gold as the asset offers no yield. Correspondingly, the 10-year US Treasury yield rose for four consecutive sessions, reaching 4.11% as the market assessed developments in the Iran conflict, tariff updates, and awaited the release of the next economic data.
Going forward, the gold market will be sensitive to three main variables: the direction of escalation or de-escalation of the Middle East conflict, the movement of the US dollar, and changes in expectations for the Fed's interest rate, as reflected in US bond yields. (asd)
Source: Newsmaker.id
