Gold steadied near $5,080 an ounce after a two-day drop as the war between the United States and Iran pushed oil prices higher and fueled inflation co...
TL;DR
Gold steadied near $5,080 an ounce after a two-day drop, as U.S.-Iran tensions drove oil prices up 25%, raising inflation concerns and strengthening the dollar. The conflict disrupted Middle Eastern oil production, pushing Brent crude above $119, while gold initially fell but recovered on hopes for a quick resolution. Analysts warn prolonged disruptions could deepen inflation risks, affecting commodities and central bank policies.
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Gold steadied near $5,080 an ounce after a two-day decline, as escalating U.S.-Iran tensions drove oil prices to a 25% surge—the largest one-day gain since mid-2022—raising inflation concerns and strengthening the U.S. dollar according to Reuters. The conflict, now in its third week, has disrupted Middle Eastern oil production and shipping through the Strait of Hormuz, pushing Brent crude to $119.50 per barrel and U.S. WTI to $119.48 according to Reuters. Higher energy costs have amplified inflationary pressures, dimming expectations for near-term Federal Reserve rate cuts and supporting the dollar, which hovered near a three-month high according to Reuters.
Gold, traditionally a hedge against geopolitical risk, initially fell over 2% amid the dollar’s strength but regained ground following comments by President Donald Trump suggesting the war could end "very soon" according to Bloomberg. This eased some market volatility, though uncertainty persists. Analysts note that prolonged disruptions to oil supplies and global trade could deepen inflationary risks, complicating central banks' policy paths according to Reuters. Meanwhile, agricultural markets mirrored oil's trajectory, with Malaysian palm oil rising 9% and soybean oil hitting a multi-year high as biofuel demand and production costs surged according to Reuters.
The dollar's resilience and inflation concerns have also weighed on other commodities, including gold, while aluminium climbed to a four-year high due to supply worries linked to the conflict according to Reuters. Market participants remain closely watching developments in the Middle East, with Tony Sycamore of IG Markets warning that "the risk of more lasting economic damage continues to build by the day" according to Reuters. As of March 12, gold's stability reflected a delicate balance between inflation fears and shifting geopolitical signals according to Bloomberg.
