Gold prices rebounded on Thursday after a three-day slide, as a weaker US dollar and renewed geopolitical tension lifted demand for the metal.
Bullion climbed as much as 2.2 per cent to trade above USD$4,600 per ounce. It had dropped 3.4 per cent over the prior three sessions. The US dollar weakened against major currencies, making gold cheaper for overseas buyers. Additionally, traders speculated that Japan may be intervening to support the yen, adding pressure on the greenback.
Gold has still fallen about 13 per cent since the US-Iran conflict began in late February. Investors expect central banks to keep interest rates higher to combat inflation from rising energy costs. Consequently, that outlook has weighed on gold, which does not offer yield.
The metal has largely moved opposite to oil prices during the conflict. Crude futures fell Thursday after earlier gains tied to geopolitical developments. Meanwhile, a report indicated that US Central Command may present military options to President Donald Trump. That signal suggested a possible escalation in the region.
Analysts continue to see long-term strength in gold despite recent volatility. Furthermore, data from the World Gold Council showed central banks increased purchases sharply in the first quarter. Lower prices encouraged buying, which offset selling by a few institutions.
“The shift in environment for gold argues for caution in gold prices, unless oil prices ease lower,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp.
Spot gold rose 1.5 per cent to USD$4,615.20 an ounce by mid-afternoon in London trading. Silver also gained 2.6 per cent to USD$73.18 an ounce. Platinum and palladium posted solid advances as well.
Read more: NevGold raises up to CAD$25M to fast-track Limo Butte development
Read more: NevGold reports more positive drill results as gold-antimony resource estimate nears
Central banks have maintained a cautious stance
The Bloomberg Dollar Spot Index fell 0.6 per cent after a prior gain. A weaker dollar typically supports commodities priced in US currency. Additionally, it improves affordability for international investors.
Central banks maintained a cautious stance on interest rates this week. The Federal Reserve held rates steady but flagged inflation risks. Meanwhile, the Bank of England outlined potential scenarios tied to the Iran conflict. One scenario could require aggressive rate hikes.
Recent data showed the US Personal Consumption Expenditures index rose 0.7 per cent last month. That marked the largest increase since mid-2022. However, economists had expected the jump, limiting market reaction.
Analysts at Citigroup expect near-term pressure on gold due to uncertainty. However, they believe safe-haven demand will return over time. They maintained price targets of USD$4,300 in three months and USD$5,000 within a year.
Meanwhile, India increased gold’s share of its foreign exchange reserves to 16.7 per cent by March.
.
