Gold Stabilizes as Traders Assess Inflation Risks and Oil Supply Shock

Sada News - Gold moved within a narrow range as traders balanced inflation risks against attempts to contain the oil supply shock stemming from the war in the Middle East.

The precious metal rose by up to 0.5% to remain above the $5,000 per ounce mark, after falling 0.3% in the previous session.

Oil prices increased following their first decline in about a week, as Iran ramped up its attacks on the Arabian Gulf, while the United States prepared to release its first batch of emergency stocks.

U.S. President Donald Trump called on other nations to help secure the Strait of Hormuz, where crude oil transit has almost ceased.

The War Weakens Rate Cut Expectations

As the war between the United States, Israel, and Iran enters its third week, and energy prices soar fueling inflation fears, the likelihood of the Federal Reserve and other central banks cutting interest rates has diminished.

Traders see almost no chance of an interest rate cut at the bank's meeting this week. Typically, higher borrowing costs negatively impact non-yielding precious metals.

Despite recent declines, gold is still up about 16% since the beginning of the year, supported by geopolitical uncertainty and threats to the Federal Reserve's independence, which boost demand for safe-haven assets.

Concerns over stagflation—a mix of slowing growth and rising inflation—also support gold in the long term, enhancing its appeal as a store of value.

Chinese Demand Remains Strong

Demand for gold has been particularly strong in China, where investors continued to increase their holdings of the metal through exchange-traded funds daily since returning from the Lunar New Year holiday on February 24.

During this period, total holdings exceeded 17 billion yuan ($2.5 billion) in value, according to Bloomberg calculations. Premiums in Shanghai have risen above the global price, indicating robust demand.

Rona O'Connell, head of market analysis at StoneX Financial, said, "Demand for gold in China has remained relatively solid in recent weeks," adding that the strength of the Chinese currency has exerted some pressure on local prices.

The spot gold price rose by 0.4% to $5,026.75 per ounce as of 12:20 PM in Singapore. Silver prices increased by 0.9% to $81.50.

Platinum and palladium were also traded higher. The Bloomberg Dollar Spot Index rose by 0.1% after a 0.6% decline on Monday.