Gold prices rise as geopolitical tensions boost safe-haven demand
What's the story
Gold prices rose on Friday, buoyed by a weaker US dollar and falling Treasury yields. The development comes as investors weigh the economic fallout of an intensifying conflict in the Middle East. Spot gold was up 0.7% at $5,112.34 per ounce while US gold futures for April delivery dipped 0.2% to $5,115.80, reported Reuters.
Market impact
Gold's recent decline and market dynamics
Despite the recent rise, gold has lost about 1% this week. The decline is due to waning expectations of an imminent US interest-rate cut and rising energy prices that are raising inflation concerns. The dollar's slight dip has made dollar-denominated commodities like gold cheaper for holders of other currencies, further influencing market dynamics.
Global factors
Geopolitical tensions impact global markets
The ongoing geopolitical tensions have also impacted the gold market. Iran's news Mojtaba Khamenei announced that Tehran will keep the strategic Strait of Hormuz closed as leverage against the US and Israel. This has raised concerns over global energy supply and risk assets, pushing oil prices above $100 a barrel. Attacks on oil tankers in the Gulf region have further complicated prospects for a quick de-escalation of the Middle East conflict.
Policy response
Fed rate cut expectations pushed back to September, December
In light of the rising oil prices, US President Donald Trump has once again urged Federal Reserve Chair Jerome Powell to cut interest rates. However, Goldman Sachs analysts have pushed back their forecast for the next US Fed rate cut to September and December from June. Traders expect the Fed to keep rates steady in the current 3.5%-3.75% range at the end of its two-day meeting on March 18, according to CME Group's FedWatch tool.
Data watch
Other precious metals performance on Friday morning
While recent inflation data indicates that price growth is under control, the war on Iran and subsequent crude price surge have yet to be reflected in the data. Investors are now awaiting the release of January's delayed Personal Consumption Expenditures Index. Meanwhile, spot silver was up 1.5% at $85.03 per ounce while platinum rose by 1.3% to $2,159.01 and palladium gained 0.8% to $1,630.71 respectively on Friday morning according to Reuters's market report from earlier today.