Gold prices extended their upward momentum for the first week since the conflict in the Middle East broke out, as bottom-fishing buying supported the market as investors waited for more clear signals about the duration of the conflict.
The precious metal at one point increased by 1.3%, exceeding the 4,500 USD/ounce mark, showing the ability to maintain a relatively stable pace despite oil prices continuing to rise and the stock market weakening. This development shows that a part of investors have taken advantage of the price correction zone in the past month to increase their positions.
The fact that Iranian-backed Houthi forces participated in fighting last weekend shows that the scope of the conflict continues to expand, along with the US increasing its military presence in the region. While Pakistan, Egypt, Saudi Arabia and Turkey are exchanging views to find solutions to de-escalate tensions, Iran has attacked aluminum smelting facilities in Bahrain and the United Arab Emirates (UAE), and some areas in Tehran have lost power after Israeli missile airstrikes.
These developments increase concerns about the possibility of prolonged conflict. Along with liquidity pressure in the financial market, gold prices have fallen by about 14% since the conflict began at the end of February.
However, the expectation that monetary policy may be adjusted in the context of weakening economic growth risks is being noted by some major financial institutions on Wall Street. Accordingly, if US government bond yields fall back, the opportunity cost of holding gold may also decrease, thereby supporting the outlook for the precious metal.
Mr. Alexandre Carrier – Portfolio manager at DNCA Invest Strategic Resources Fund believes that gold prices may still face risks in the short term, in the context of the possibility of some central banks adjusting reserves and investors narrowing their positions.
Gold purchases by central banks were once an important factor supporting the upward momentum of the precious metal in recent years. However, the central bank of Turkey went against this trend in the first two weeks since the conflict broke out when it sold and made swap transactions of about 60 tons of gold, equivalent to more than 8 billion USD.
Spot gold prices rose 1.1% to 4,536.84 USD/ounce at 3:35 PM Vietnam time. Silver prices rose 1.3% to 70.70 USD/ounce. Platinum and palladium prices also rose, while the Bloomberg Dollar Spot Index - a measure of USD strength - fell 0.1% after rising 0.7% last week.
