Gold prices moved higher on Thursday as escalating tensions in the Middle East boosted demand for the precious metal as a safe-haven asset.
At 06:05 ET (11:05 GMT), spot gold was up 0.5% at $5,167.00 an ounce after earlier touching levels above $5,200/oz during the session. U.S. gold futures rose 0.8% to $5,176.35/oz.
The metal had already gained about 1% in the previous trading session. That recovery followed a sharp drop of nearly 5% on Tuesday when a stronger dollar weighed heavily on prices.
Gold supported by heightened Middle East tensions
Geopolitical risks remain elevated after the United States sank an Iranian warship in international waters, while Iran continued launching missiles across multiple countries in the region and reportedly targeted key energy infrastructure.
The escalation has intensified fears of a prolonged regional conflict, prompting investors to trim exposure to riskier assets and shift funds toward gold, which is widely regarded as a hedge during periods of geopolitical uncertainty and market volatility.
“Looking ahead, gold faces competing macro forces,” said analysts at ING in a note. “The inflationary impact of the Middle East conflict, via sharply higher energy prices, could reinforce expectations of higher interest rates for longer — a headwind for non yielding assets such as gold.”
“However, elevated geopolitical uncertainty continues to support a risk premium, helping to underpin prices despite the challenging rates backdrop,” they added.
Dollar strength caps gold’s upside
Market participants are also closely watching the U.S. Dollar Index, which rebounded Thursday after slipping 0.3% overnight. Earlier in the week the index logged two consecutive sessions of strong gains.
A firmer dollar typically pressures gold because it raises the metal’s cost for buyers using other currencies.
“Uncertainty typically supports safe havens, implying upside for gold,” Morgan Stanley strategists led by Amy Gower wrote in a note, but added that recent price action has been “more mixed with USD strength.”
Several forces are currently shaping gold prices simultaneously, including expectations for Federal Reserve interest-rate cuts, currency movements, geopolitical risks and overall liquidity conditions in financial markets.
According to the strategists, the recent wave of selling in gold may reflect investors raising cash during periods of market stress rather than a shift in the longer-term outlook.
“We think gold’s underperformance is likely to be temporary if the current situation continues, with recent selling most likely due to the need for liquidity,” the strategists said.
Among other precious metals, silver rose 1.6% to $84.53 per ounce, while platinum gained 1% to $2,176.200/oz.
Benchmark copper futures on the London Metal Exchange fell 1.2% to $12,904.00 a ton, while U.S. copper futures dropped 1.3% to $5.8308 a pound.
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