Gold prices rose, partially recovering from losses in the previous session, as investors entered a market laden with risk amid ongoing conflict in the Middle East. Bullion climbed as much as 2 per cent, rebounding after a four-day period of gains ended Tuesday. Traders are weighing gold’s traditional role as a safe-haven asset against the backdrop of a strengthening US dollar, which has seen a 1.4 per cent rally this week. Rising bond yields and surging energy prices have also amplified concerns about widespread inflation.
These factors have prompted traders to reduce their expectations for monetary easing, while a broad sell-off across equity markets on Tuesday forced some investors to liquidate holdings to meet margin requirements in other areas of their portfolios. Peter Kinsella, global head of forex strategy at Union Bancaire Privee, UBP SA, noted that the gold market is undergoing a standard “portfolio risk-reduction move,” consistent with patterns observed during previous conflicts. Union Bancaire Privee is a Swiss private bank that provides wealth management services.
Data from the Commodity Futures Trading Commission indicates a significant reduction in bullish sentiment towards gold, with money managers’ net long positions approaching a decade low since late January. According to Kinsella, this relatively low level should limit any significant downward movement in gold prices. Despite recent volatility, bullion has rallied nearly a fifth this year, reaching an all-time high above $5595 an ounce in late January, driven by persistent geopolitical tensions, trade concerns, and uncertainty surrounding the US Federal Reserve’s policies.
Markets remain sensitive to developments as the US-Israeli war on Iran continues. Spot gold was last up 1.7 per cent to $US5172.78 an ounce, reflecting renewed investor interest in the precious metal as a hedge against geopolitical instability.
