Gold experienced a significant increase, with bullion advancing by as much as 1.9% to trade above $4,080 an ounce. This rise was attributed to dip-buying by traders, who were closely monitoring developments in the Middle East for their potential impact on inflation and, consequently, the Federal Reserve's monetary policy. This surge followed two consecutive weeks of losses for the precious metal.
Silver also saw a substantial jump, rising as much as 5% to just under $60 an ounce, marking its largest gain in over five weeks. The price movements in both gold and silver occurred amidst heightened tensions in the Middle East, with concerns that escalating energy costs, driven by the conflict, could fuel inflation and pressure the Federal Reserve to implement tighter monetary policies. However, some analysts, like Christopher Wong of OCBC, suggest that gold's upside might be limited unless oil prices recede and expectations of a Fed tightening lessen.
Despite the ongoing geopolitical issues, including threats of a maritime blockade by Yemen's Houthi rebels and attacks on Iranian targets by US forces, gold found support at the key psychological level of $4,000 an ounce. Diplomacy efforts, with Iran indicating mediators had presented proposals to ease hostilities, also contributed to a softening of oil prices, which can influence gold's appeal as a safe-haven asset. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.1% lower, while platinum and palladium also saw increases.
