Online Reporter
Gold edged lower, reversing an earlier advance, as the world waited for Iran’s response after the US joined Israel in attacking the Islamic Republic over the weekend.
Bullion traded near US$3 360 an ounce after being up as much as 0,8 percent earlier.
The US’s assault on Iran’s three main nuclear facilities buoyed the dollar, while oil jumped sharply on fears that Tehran could attack Middle Eastern energy infrastructure or shipping in the Strait of Hormuz.
The hostilities in the Middle East have given fresh impetus to a rally that’s pushed gold up almost 30 percent so far this year.
While the chances of an expanding conflict are, theoretically, supportive for bullion, a sustained rise in energy prices would spur inflation and make Federal Reserve rate cuts less likely, a negative for the metal that doesn’t offer any interest.
“The market’s still not convinced that the US attack on Iran will ultimately lead to a significant rise in geopolitical tensions,” said Daniel Hynes, a senior strategist at ANZ Banking Group Ltd.
“That’s why we haven’t seen investors flock to haven assets. Any haven demand could be offset by investors concerns that any rise in oil prices could potentially leave the Fed holding rates high amid inflationary concerns.”
Tehran, so far, hasn’t launched any major retaliatory attacks, and is likely to receive only rhetorical support from Russia and China, while militia groups it’s armed and funded for years are refusing or unable to enter the fray. Iran may also not want to antagonise Beijing by taking any action that would lead to a major surge in oil prices.
That, together with the fact that bullion is only about US$140 an ounce off its record high reached in April, may be restraining gains at this point.
Spot gold fell 0,2 percent to US$3 361 an ounce as of 11:03 a.m. in Singapore. The Bloomberg Dollar Spot Index added 0,2 percent. Silver was steady, while platinum and palladium fell. — Bloomberg
