Gold Recovers Despite Inflation Fears from Energy Shock

SadaNews - Gold partially recovered after a nearly 4% drop on Wednesday, amid a buying spree at lower prices, which helped the metal withstand rising oil prices and inflation risks arising from the war in the Middle East.

The precious metal rose by up to 0.7%, recovering some of the losses it incurred during six consecutive sessions of decline, marking the longest losing streak since late 2024.

The Federal Reserve kept interest rates unchanged in its last meeting, anticipating only one rate cut this year, while its chair Jerome Powell stated that any rate cut requires progress in curbing inflation. Fed officials noted in a statement that the war in Iran makes the outlook for the U.S. economy "uncertain".

Oil and Dollar Pressures on Gold

Oil prices rose on Thursday after Iran and Israel targeted some of the region's most important energy facilities. Almost three weeks into the war, rising oil and gas prices are increasing inflation risks, reducing the likelihood of rate cuts by the Fed and other central banks. This situation poses a negative factor for gold, which does not yield a return. Additionally, the rise of the dollar has added pressure on commodities priced in the U.S. currency.

Nicolas Frabel, global head of institutional markets at "ABC Refinery", stated, "The strength of the dollar and the tightening monetary conditions generally among central banks in advanced economies create an uncertain path for gold in the near term."

He added, "However, if inflation rises faster than interest rates, the decline in real interest rates may support gold in the medium term."

Strong Annual Performance Despite Recent Declines

Gold is still up about 12% since the beginning of the year, although its upward momentum has slowed in recent weeks with declining prospects for a near-term rate cut, and some investors have sold the metal to cover margin calls in their investment portfolios.

Gold had reached a record level of over $5595 per ounce in late January, and since the war began on February 28 until the close on Wednesday, it has declined by about 9%.

Following the Fed's recent meeting, Powell also made rare comments regarding his future at the U.S. central bank following a probe by the Justice Department. He stated that he does not intend to resign from his position as governor until the investigation is completed.

He added that if his successor is not confirmed before his term as chairman ends in May, he will continue to serve as interim chair, a temporary designation previously adopted by the Fed when the chair position was vacant.

The Justice Department's probe has raised concerns about political interference in the Fed's operations, undermining confidence in U.S. assets and bolstering gold's appeal.

The spot gold price rose by 0.4% to $4835.55 per ounce at 9:21 AM in Singapore. Silver also increased by 0.2% to $75.49, while platinum remained nearly unchanged, and palladium rose. The Bloomberg Dollar Spot Index fell by 0.1% after rising by 0.5% in the previous session.