Spot gold fell below $5,200 an ounce in early Asian trade on Thursday, pressured by a firmer dollar and surging oil prices amid escalating US-Israel hostilities with Iran. The metal retreated 0.4% to $5,154.46/oz, while gold futures (GC=F) shed 0.4% to $5,159.40/oz after briefly topping $5,200 overnight.
Market Snapshot
Oil prices jumped sharply after reports of strikes on two international tankers near Iraq, boosting Brent crude (LCOc1) futures around 8% to near $100/bbl in recent sessions. The US dollar index (DXY) strengthened, hitting multi-week highs above 104 amid haven flows and inflation fears. US stocks closed lower, with the Dow down 0.61% at 47,417.27 and the S&P 500 (SPX) off 0.08%, reflecting souring risk appetite.
Silver (SI=F) dipped 0.2% to $85.56/oz, while platinum lost 0.1% to $2,167/oz as the broader complex tracked gold’s pullback. US 10-year Treasury yields edged up to 4.24%, climbing 8 bps recently on bets for sustained inflation from higher energy costs.
Conflict Escalation
Continued hostilities in the US-Israel-Iran war kept markets on edge, with Iran warning ships must seek permission for Strait of Hormuz passage and US deploying bombers while IDF drones targeted Tehran sites. President Donald Trump insisted the conflict nears an end, but fresh attacks signal no de-escalation. Oil tanker strikes near Iraq heightened supply disruption fears, driving crude higher despite IEA’s 400 million barrel release.
Inflation Pressures Build
US CPI data met expectations but stoked worries over energy-driven price surges, dimming Fed rate cut hopes and hurting non-yielding gold. Higher oil threatens a long-term inflation uptick, prompting hawkish central bank outlooks that cap bullion gains. “Oil at these levels risks embedding higher inflation across the board, sidelining gold until tensions ease,” said Jane Foley, head of FX strategy at Rabobank.
Risk Flows Shift
Equities faced pressure from growth concerns tied to the Iran conflict, with Dow futures pointing lower in extended trade. Safe-haven bids favored the dollar over gold amid equity outflows, though bullion holds above $5,000 on lingering war risks. “Traders rotate into cash and crude as the dollar shines brighter than gold right now,” noted Ole Hansen, commodity strategist at Saxo Bank.
Macro Implications
The war clouds global growth outlook, with oil spikes potentially adding 1-2 percentage points to headline inflation if prolonged. Central banks face tighter policy paths, curbing rate cuts and supporting yields. Correlated FX moves saw the dollar firm against euro and yen, while emerging currencies weakened on risk-off sentiment.
Key Monitors Ahead
Traders eye fresh US CPI revisions, IEA oil reserve updates, and Strait of Hormuz shipping signals for clues on escalation. Fed speakers’ comments on energy inflation will gauge the risks of a policy pivot.
