(Bloomberg) — Gold edged higher on signs dip buyers stepped into the market after a flare-up in hostilities in the Middle East pushed down prices by 2% on Monday.
Bullion rose as much as 0.6% toward $4,550 an ounce. The US military said it fought off attacks from Iran as it facilitated the passage of two US-flagged vessels through the Strait of Hormuz. Adding to the tension, the UAE said it intercepted cruise missiles fired by the Islamic Republic and blamed an Iranian drone strike for a large fire at its Fujairah port.
The violence shook a ceasefire that has largely held since going into effect on April 8, and raised inflation and rate-hike risks. Oil prices surged on the reports, while 30-year Treasury yields rose to the highest since July, as traders boosted wagers that the Federal Reserve will have to boost interest rates to curb inflation. That’s negative for non-yielding bullion.
“We believe gold can perform if the Fed is on hold, so long as consensus and Fed forward guidance point towards future easing,” analysts from State Street Investment Management including Aakash Doshi said in a note. Even if bullion falls further on expectations for a hawkish Fed, it’s likely too be supported around the $4,000 an ounce level, they said.
Traders are looking to this week’s announcement of the US Treasury Department’s borrowing plans for the next three months and a loaded calendar of economic releases for further clues on the trajectory of rates.
Spot gold was 0.4% higher at $4,541.79 an ounce at 11:14 a.m. in Singapore. Silver rose 0.5% to $73.10. Platinum and palladium advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was marginally higher after rising 0.2% on Monday.
More stories like this are available on bloomberg.com
