Gold prices narrowed their gains as the USD partially recovered after a decline, amid mixed information about the war in the Middle East that caused oil prices to fluctuate sharply and blurred the prospect of US interest rate cuts.
Conflicts continue to disrupt oil exploitation and refining activities in the Middle East. The US and Israel are carrying out their most intense attacks on Iran.
According to Mr. Bart Melek - Global Commodity Strategy Director at TD Securities, for gold traders, the cooling down of oil prices but still hovering at a high level means inflation will increase, but not to the extent that the US central bank cannot cut interest rates this year. This is a positive factor for gold because the precious metal does not generate profits.
Before Mr. Trump said on Monday that the war with Iran could end "very soon", investors once suggested that the US Federal Reserve (Fed) and other major central banks could have to keep interest rates unchanged, even raise interest rates to curb inflation amid rising energy prices, a disadvantageous scenario for gold. Some investors have also used gold as a source of liquidity as the stock market plummeted further.
Although trading is still volatile and the upward momentum has stalled, gold has still increased by about one-fifth since the beginning of the year. The disruptions caused by Mr. Trump to global trade and geopolitics, along with pressures on the Fed's independence, generally still support safe-haven assets.
However, since the war broke out, gold holdings by ETFs have decreased. According to Bloomberg data compiled, total holdings decreased by nearly 30 tons last week, recording the strongest weekly net selling in more than two years.
Spot gold prices rose 1.1% to $5,203.96/ounce in this morning's trading session. Silver prices rose 1.7% to $88.51/ounce. Platinum prices rose while palladium fell. The Bloomberg Dollar Spot Index fell 0.1%.
