Gold prices have risen for the fifth consecutive day as the escalating conflict in the Middle East disrupts global energy markets and drives investors toward safer assets. Bullion climbed as much as 0.8 per cent to top $US5360 an ounce, marking a gain of over 3 per cent in the previous four sessions as the conflict reverberates across the region. Increased geopolitical instability is a key factor in gold’s recent performance.
The conflict has led to a spike in energy prices, stoking inflation fears in the US and causing Treasuries to slump. This has raised the likelihood that the Federal Reserve will maintain current interest rates for an extended period. Traders are now pricing in a rate cut by September, which is later than previously estimated. While higher rates can weigh on gold, as it doesn’t pay interest, they also reinforce bullion’s role as a reliable store of value.
Concerns about rising US inflation were already present before the recent escalation in the Middle East. Manufacturing input prices soared in February at the fastest pace since 2022, according to data from the Institute for Supply Management. JPMorgan Chase & Co chief executive officer Jamie Dimon has cautioned that inflation could become a significant problem for the US economy.
Gold has rallied by nearly a quarter this year, supported by persistent geopolitical and trade tensions, as well as concerns about the Federal Reserve’s independence. The revival of a broader retreat from bonds and currencies, known as the debasement trade, has further propelled the multiyear rally. The metal hit a record high above $US5595 an ounce at the end of January.
