(March 11): Gold steadied as traders tracked the war in the Middle East, with the US dollar weakening and investors assessing a report the International Energy Agency (IEA) may undertake the largest-ever release of oil reserves.
Bullion held below US$5,200 ($6,619.78) an ounce on Wednesday, after adding 1% on Tuesday. The IEA proposal, reported by The Wall Street Journal, envisages a release above the 182 million barrels that followed Russia’s invasion of Ukraine in 2022. Crude was flat, while a gauge of the US currency slipped as much as 0.2% in a fourth day of declines.
The precious metal has risen by about a fifth this year, although prices have not made headway since the outbreak of the conflict between the US, Israel and Iran in late February. The initial phase of the war boosted the dollar, hurting precious metals. Bullion may also have been sold to cover losses elsewhere.
For gold, the extreme volatility in energy prices has increased concerns over inflation, in turn reducing expectations that the US Federal Reserve (Fed) and other central banks will be able to cut interest rates. Higher borrowing costs are a headwind for precious metals, which don’t pay interest.
The metal “struggled somewhat under the weight of US dollar strength and falling US equities last week, with gold being sold to cover equity-margin calls”, said David Wilson, the director of commodities strategy of BNP Paribas SA. “Physical gold interest, particularly in Asia, provided a backstop.”
Since the war began, gold-backed exchange-traded funds have seen outflows.
See also: Gold dips below US$5,000 as high oil prices threaten Fed rate path
Still, the precious metal has also found some support as a haven during a period of upheaval. “It’s worth buying gold on weakness,” said Alexandre Carrier, a portfolio manager at the DNCA Invest Strategic Resources fund.
The war continues to disrupt crude production and refining across the Middle East. The US and Israel have conducted their most intense day of attacks yet against Iran, and won’t give up until the Islamic Republic is beaten, the Pentagon said on Tuesday, striking a more aggressive tone after US President Donald Trump’s earlier indication that the conflict could end soon.
Traders have pared the amount of Fed policy easing they expect this year ahead of data due Wednesday that’s projected to show February inflation remained well above the central bank’s target, even before the fighting erupted.
See also: Gold falls as traders weigh fading rate-cut bets and rising oil
Spot gold was flat at US$5,191.94 an ounce as of 3.35pm in Singapore. Silver fell 1.3% to US$87.21 an ounce. Platinum declined, while palladium was steady. The Bloomberg Dollar Spot Index slipped 0.2%.
Uploaded by Tham Yek Lee
