Gold prices recovered after a three-session consecutive decline, as the USD weakened and investors considered the possibility of the US resuming military operations in Iran.
The precious metal at one point increased by 2.2% to over 4,600 USD/ounce, after falling 3.4% in the previous three sessions. The USD fell against the major currency basket, amid speculation that Japan is intervening in the foreign exchange market to support the yen. Weakening the greenback often supports gold prices by reducing costs for investors holding other currencies.
Since the conflict broke out at the end of February, gold prices have fallen nearly 13%, as the market bets that central banks will have to maintain high interest rates to curb the inflationary impact from the sharp increase in energy prices. This is a disadvantage for gold – an unprofitable asset.
President Donald Trump said the US will continue to maintain naval blockade of Iranian ports, amid rising oil prices to their highest level since the outbreak of hostilities due to concerns that the Strait of Hormuz cannot be reopened soon. Previously, Axios reported that US military commanders would report to Mr. Trump on military options, showing that the possibility of resuming operations is being considered, while Iran remains firm.
Most experts still maintain a positive view of the precious metal. The latest data from the World Gold Council shows that central banks increased gold purchases at the fastest pace in more than a year in the first quarter, as falling prices triggered a wave of buying large enough to compensate for sales from some organizations.
Mr. Christopher Wong, a strategic expert at Oversea-Chinese Banking Corp, commented: "The current environment shows that caution is needed with gold prices, unless oil prices cool down. However, in the medium term, the outlook is still supported by demand from central banks and diversified reserve capital flows.
As of 12:26 Vietnam time, spot gold prices fell slightly 0.08% to $4,613.44/ounce. Silver prices rose 3.3% to $73.65/ounce, while palladium and platinum also simultaneously went up. The Bloomberg Dollar Spot index – a measure of the strength of the USD – fell 0.8% after rising 0.4% in the previous session.
