Gold prices rose for a fifth consecutive session on Tuesday, as investors sought safe-haven assets amid an escalating U.S. and Israeli air war against Iran.
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Spot gold prices fell on Tuesday, sliding more than 4% at one point, as some investors favoured the dollar rather than gold as a safe-haven from the impact of the U.S.-Israeli air war on Iran, and as traders trimmed rate-cut bets given inflation concerns.
Spot gold was down 3.3% at $5,150.89 an ounce, after falling to its lowest since February 20 earlier. U.S. gold futures for April delivery lost 2.8% to $5,161.50.
“The dollar is absolutely roaring away, as are U.S. Treasuries, and that’s providing a strong headwind to gold and particularly silver,” said independent analyst Ross Norman.
Spot silver fell 9.1% to $81.31 an ounce after climbing to a more than four-week high on Monday.
U.S. dollar rises to more than one-month high
The U.S. dollar rose 0.9% to a more than one-month high, while U.S. Treasury yields shot higher.
A stronger U.S. currency typically makes dollar-denominated gold more expensive for buyers using other currencies, and higher yields raise the opportunity cost of holding the non-yielding metal.
The Nasdaq led losses among U.S. stock index futures with a 2.3% drop on Tuesday.
Global oil and gas shipping rates soared, stoking inflation fears, after an official from Iran’s Revolutionary Guards said on Monday that the Strait of Hormuz is closed to marine traffic and the country will fire on any ship trying to pass.
While bullion is regarded as a hedge against inflation over the long term, higher inflation can also translate into higher real yields and a firmer dollar, keeping borrowing costs elevated for longer and dampening appetite for the non-yielding metal.
Traders expect the U.S. Federal Reserve to hold rates at the end of its next two-day meeting on March 18, according to the CME Group’s FedWatch tool. The odds of a June hold, previously below 45%, edged up to more than 60%.
However, many analysts remain bullish on gold, including BMI, a unit of Fitch Solutions, which said that the metal could reach a record high above $5,600 an ounce this week unless there are signs of de-escalation in the conflict.
“In an environment where geopolitical risks intersect with inflationary pressures and monetary policy complexities, gold becomes a tool for reallocating risk within investment portfolios,” said XS.com analyst Rania Gule.
Platinum lost 11.7% to $2,034.20 and palladium shed 5.7% at $1,665.22.