Gold rose for its fourth straight session as traders bet the Federal Reserve may need to cut interest rates to shore up a possible economic downturn even as hopes grew that war in the Middle East may be nearing a conclusion.
Bullion rose as much as 2.7% Wednesday to approach $4,800 an ounce before trimming gains. The Middle East war has upended global markets and choked supplies of energy and other goods, triggering concerns about a spike in inflation that outweighed gold’s traditional appeal as a haven.
Bond traders are now reducing bets that central banks will hike rates to tame inflationary risks arising from the conflict, turning instead to the war’s impact on economic growth. Fed Chair Jerome Powell said earlier this week that longer-term inflation expectations remain anchored. Lower rates are typically positive for non-yielding gold.
“Gold’s safe‑haven appeal tends to re‑emerge when the narrative shifts from inflation to growth risk,” said Yuxuan Tang, Asia head of rates and FX strategy at JPMorgan Private Bank. “We hold a high conviction that the Federal Reserve has limited bandwidth to raise rates this cycle” and will instead focus on the strained labor market, she said. Lower rates are a tailwind for gold, which doesn’t pay interest.
Investors will get some cues from US President Donald Trump’s speech to the nation about the Middle East conflict that’s now in its fifth week. Trump will hail his military campaign in Iran as a success during Wednesday’s prime-time address and stress that the conclusion of operations may come in two-to-three weeks, according to a White House official. The speech will cast the US as having met or exceeded all of its military goals, the official said, speaking on condition of anonymity to detail the president’s remarks before they’re delivered.
Trump has vacillated between saying a resolution is imminent and threatening an escalation of military operations. Iran has also listed certain requirements to end the fighting, including authority over the Strait of Hormuz, the crucial waterway that – before the war – was a transit point for around a fifth of the world’s oil and liquefied natural gas.
Separately, February retail sales exceeded economist estimates, as did ADP Research’s estimate of March private-sector hiring. Fed policymakers cut interest rates three times last year in reaction to signs of job-market weakness that have since abated somewhat.
Despite the rebound in the past few days, bullion’s near 12% decline in March was its worst monthly performance since October 2008. Retail buying slowed in the initial days of gold’s March plunge, as it confounded customers’ expectations of a rally in the face of the escalating conflict in Iran, said David Higgins, head of trading at bar and coin dealer Merrion Gold.
“In the last week or so, things have been very busy again,” he said. “Retail buyers aren’t as affected by higher interest rates as a bank is, and are more focused on inflation.”
Goldman Sachs Group Inc. is among the banks to retain a bullish view on gold. In a note published Tuesday, analysts Lina Thomas and Daan Struyven kept a year-end forecast of $5,400 an ounce, citing continued purchases by central banks and a forecast of two more rate cuts in the US this year.
Spot gold rose 1.9% to $4,758.57 an ounce as of 4:59 p.m. in New York. Silver was little changed at $75.08. Platinum edged higher, while palladium dipped. The Bloomberg Dollar Spot Index, a gauge of the US currency, fell 0.2%.
With assistance from Sybilla Gross.
This article was generated from an automated news agency feed without modifications to text.
