Market Confused, Will Gold Start Higher or Fall Slightly?
Gold edged higher, with safe-haven demand from rising risks of a wider war in the Middle East offset by weak U.S. economic data that raised the prospect of a rate cut.
Bullion was trading around $3,390 an ounce, after fluctuating in a relatively narrow range on Tuesday. There was fresh speculation that the U.S. would join Israel’s attack on Iran, with President Donald Trump meeting with his national security team in Washington and demanding Tehran’s unconditional surrender.
While the escalating tensions boosted gold’s appeal as a store of value amid geopolitical turbulence, traders also factored in a series of lukewarm U.S. reports on retail sales, housing and industrial production that strengthened the case for a Federal Reserve interest rate cut this year. However, the Middle East conflict has fueled a surge in crude oil prices that could stoke inflation, making aggressive Fed monetary easing less likely. A rate cut is usually a positive for non-yielding gold. The U.S. central bank is due to announce its latest policy settings later on Wednesday.
The precious metal rose nearly 4% last week as Israel began its military campaign against Iran’s nuclear program. Prices have been muted since then, even as the countries have continued to slug it out.
“Despite rising safe-haven demand, speculative gold positioning remains unusually low given macro uncertainty,” Goldman Sachs Group Inc. said in a note late Tuesday. “This hesitancy likely stems from investors who believe they missed out on the initial rally.”
Gold has surged nearly 30% this year on rising geopolitical risks, the prospect of a global economic slowdown due to Trump’s tariff agenda and increased central bank buying. It is trading about $110 below a record high in April.
Spot gold rose 0.1% to $3,390.83 an ounce as of 6:48 a.m. in Singapore. The Bloomberg Dollar Spot Index rose 0.5% on Tuesday. Silver was flat, while platinum and palladium fell.
Source: Bloomberg
