Gold Swings as Traders Weigh Middle East Conflict, Weak Data
Gold fluctuated as investors tracked an escalation of risk in the Middle East and digested weak US economic data.
Israel and the US are ratcheting up pressure on Iran, sparking fresh speculation that Washington could be preparing for a more direct intervention in the conflict. Meantime, tepid US reports on retail sales, housing and industrial output bolstered the case for the Federal Reserve to cut rates this year if a rally in crude oil prices proves temporary and not a threat to inflation.
The precious metal advanced by almost 4% last week as Israel opened its military campaign against Iran’s nuclear program. Price gains have been muted since then, even as Israel and Iran continue to strike at each other.
“At first sight, gold’s reaction may be surprising, considering the potential consequences of the conflict and also the typical skittishness of the more short-term-oriented traders in the market,” said Carsten Menke, head of next generation research at Julius Baer Group Ltd. “But a closer look suggests that it is in line with the historical pattern of such geopolitical shocks not lastingly lifting gold prices.”
Prices — currently about $115 short of a record hit in April — are on pace for a sixth monthly gain, which would be the best such run in more than two decades.
Looking ahead, traders will be watching a rate decision by the Fed on Wednesday. The US central bank is expected to hold rates steady in June and July, but may telegraph its intentions via revised economic and rate forecasts on Wednesday.
Spot gold was little changed at $3,380.87 an ounce as of 11:30 a.m. in New York. The Bloomberg Dollar Spot Index was up 0.2%. Silver, platinum and palladium all gained.
Source: Bloomberg
