Gold clawed back some losses after the postponement of US strikes against Iran’s power infrastructure offered some respite from the precious metal’s dramatic wartime retreat.
Bullion rose as much as 0.9% in early trading, having dropped nearly 2% in the previous session to extend a losing streak for a ninth day. High energy prices resulting from the conflict in the Middle East have raised the risk of inflation and prompted investors to ditch their relatively liquid and profitable positions in gold for other assets.
With the war now in its fourth week, US President Donald Trump announced a five-day delay to attacks he had earlier threatened on Iran’s power network and said on Monday that “productive discussions” had taken place. US stocks rose while Treasury yields and the dollar retreated, although Tehran later denied any talks had taken place. Oil steadied on Monday after slumping 10% in the previous session.
Despite the pause, the outcome of any negotiations and future passage of ships through the Strait of Hormuz remain uncertain. Even existing damage to energy infrastructure will take time to rebuild. That means the threat of inflation remains, as well as the expectation of rate hikes by the US Federal Reserve and other central banks — a headwind for non-yielding precious metals.
A similar dynamic followed the Russian invasion of Ukraine in early 2022, when an initial spike in the safe-haven asset was followed by a months-long decline, as an energy price shock rippled through markets and added to inflationary pressures.
“What you tend to see in a big crisis like this is investors selling heavily positioned, well-performing assets in order to fund margin calls for underperforming assets — equities, bonds, whatever,” said Peter Kinsella, global head of forex strategy at Union Bancaire Privee, UBP SA.
Gold performed in a similar manner in 2022 and during the 2008 global financial crisis, he said. “Short-term shifts in pricing are all about positioning,” he said, adding that long-term drivers hadn’t changed.
Though bullion declined nearly 17% from the start of the war in late February to Monday’s close, it had previously been on a prolonged rally underpinned by factors including geopolitical and trade tensions and elevated purchases by central banks. Some countries that have been accumulating bullion are energy importers, so a steeper oil and gas bill resulting from the war means fewer dollars retained to be recycled into gold.
Spot gold gained 0.8% to $4,441.01 an ounce at 7:59 a.m. in Singapore. Silver rose 0.9% to $69.76. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, edged up 0.1% after ending the previous session 0.4% lower.
With assistance from Jack Ryan.
This article was generated from an automated news agency feed without modifications to text.
