War Still on the Rise, Gold Drops First!
Gold moved lower, as traders watched for signs that the conflict in the Middle East could escalate into a wider war after President Donald Trump called for Iran’s unconditional surrender.
Bullion prices fell as much as 0.4% to around $3,375 an ounce, after fluctuating in a relatively narrow range on Tuesday. Trump’s warning of a possible attack on the country’s leader, Ayatollah Ali Khamenei, and a meeting with his national security team in Washington have fueled fresh speculation that the U.S. could join an Israeli strike on Iran.
Traders also factored in a series of lukewarm U.S. reports on retail sales, housing and industrial production on Tuesday 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. Interest rate cuts are usually positive for non-interest-bearing 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 continue 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 hesitation 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 $125 below its April record high.
Spot gold fell 0.3% to $3,376.80 an ounce as of 10:46 a.m. in Singapore. The Bloomberg Dollar Spot Index was flat. Silver was steady, while platinum and palladium advanced.
Source: Bloomberg
