Gold Dragged Down by Dollar, Oil Surge Tests Safe Haven Narrative
Gold prices weakened, strengthening the US dollar and re-inflating inflation, as the Middle East war entered its second week and oil prices surged above US$100 per barrel. The combination of the oil surge and the strengthening dollar narrowed the room for gold's rally, even as geopolitical tensions remained high.
Early in trading, gold fell to near US$5,120 per ounce, after posting its first weekly decline in more than a month. At the same time, major oil producers began reducing production as the US-Israel conflict with Iran showed no signs of abating, while the dollar index strengthened by around 0.4%.
The main pressure came from the inflation channel: fueling concerns that US prices would "run hot again," leading the market to consider the Fed potentially holding interest rates longer—even with a more hawkish scenario being factored in. High interest rates and a strong dollar are typically a negative combination for precious metals because they increase the opportunity cost of holding gold. Interestingly, amid market turmoil, gold also served as a source of liquidity during sharp declines in global stocks—making its movements not always "in line" with the safe haven narrative. Although the momentum for rising interest rates has been restrained, gold has still recorded a nearly one-fifth increase so far this year, supported by major changes in global trade and geopolitical dynamics, including issues related to the Fed's independence.
The Middle East conflict itself has entered its 10th day. Attacks on energy infrastructure and disrupted shipping through the Strait of Hormuz—a route that typically handles about one-fifth of the world's oil supply—have contributed to the oil and gas rally. As of 6:56 a.m. in Singapore, spot gold fell 0.9% to US$5,124.48/ounce; silver fell 1.6% to US$83.22, platinum fell more than 3%, and palladium fell 0.9%. The Bloomberg Dollar Spot Index rose 0.4% after gaining 1.3% last week. (alg)
Source: Newsmaker.id
