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- Gold price edges higher to around $4,725 in Friday’s early European session.
- Escalating tensions in the Middle East support the safe-haven flows.
- Concerns about inflationary pressure and liquidity squeeze could weigh on the Gold price.
Gold price (XAU/USD) rebounds to near $4,725, snapping the seven-day losing streak during the early European session on Friday. The precious metal edges higher as the ongoing US-Iran conflict spikes demand for safe-haven assets. Traders will closely monitor the situation in the Middle East.
Iranian Foreign Minister Abbas Araghchi vowed to show “ZERO restraint” if the country’s energy infrastructure were hit again, per Bloomberg. Meanwhile, Saudi Foreign Minister Faisal bin Farhan Al Saud warned that the kingdom’s restraint isn’t “unlimited” and added it could take military action. Rising geopolitical risks could boost traditional safe-haven assets such as Gold in the near term.
On the other hand, soaring crude oil and energy prices, driven by the escalating US-Israeli war with Iran, reignite inflation fears. This, in turn, might delay rate cuts and make non-yielding gold less attractive.
The US Federal Reserve (Fed) left interest rates unchanged on Wednesday and expressed concern about the impact of rising oil prices on inflation. Fed Chair Jerome Powell said that the possibility of a rate hike has come up in policy committee discussions. Hawkish remarks from Fed officials lift the US Dollar (USD) and weigh on the USD-denominated commodity price.
Traders could sell liquid assets like yellow metal to cover margin calls and raise cash during the broader market volatility. “Global markets have seen broad selloffs as investors search for the quickest assets to sell, perhaps we are now seeing the next leg of this phase where the perceived safe haven assets are sold to fund purchases of those that may have overacted to the current situation,” said Paul Surguy, managing director and head of investment management and proposition at Kingswood Group.
