Gold rose for a fifth day, as the escalating war in the Middle East upended global energy markets and drove investors to safer assets.
Bullion climbed as much as 1.1% to top $5,380 an ounce, adding to a gain of more than 3% over the previous four sessions as conflict reverberated across the region. President Donald Trump said the US would continue its military offensive for as long as it takes, and Israel announced a “wave of strikes” targeting Iran's command centers. Tehran attacked oil and gas infrastructure and threatened shipping in the strategic Strait of Hormuz.
The resulting spike in energy prices has stoked inflation fears in the US, causing Treasuries to slump and raising the likelihood that the Federal Reserve will leave interest rates unchanged for longer. Traders are now pricing in a rate cut by September, later than previously estimated. While higher rates may weigh on gold as it doesn't pay interest, they can also reinforce bullion's role as a better store of value.
Even before the US-Israeli attacks on Iran over the weekend, there were signs that US inflation was set to rise. Manufacturing input prices soared in February at the fastest pace since 2022, according to a gauge from the Institute for Supply Management. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned that inflation could become a “skunk at a party” for the US economy.
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Gold has rallied by nearly a quarter this year, with demand supported by persistent geopolitical and trade tensions as well as concerns about the Fed's independence. The revival of a broader retreat from bonds and currencies, known as the debasement trade, has added fresh impetus to a multiyear rally.
There's “ample scope” for bullion to challenge a record high above $5,595 an ounce that it hit at the end of January, should the conflict in the Middle East extend for several weeks, Swiss private bank Union Bancaire Privee, UBP SA said in a note. On Monday, the metal closed at its highest in over a month.
However, if the situation remains in check, gold could lose some of its upward momentum, said Han Xiao, general manager of Zhishui Investment Management Co., a Chinese fund manager. “The impact of geopolitical events, especially wars, tends to be front-loaded and realized quickly,” he said. “If the situation does not escalate further, the influence on precious metals may gradually diminish over time.”
In developments on Tuesday, the American embassy in the Saudi Arabian capital, Riyadh, came under attack from two drones as Iran stepped up strikes on the kingdom in retaliation against the US and Israel. Trump told a news outlet that the US would hit back.
Spot gold rose 0.8% to $5,366.59 an ounce as of 11:51 a.m. in Singapore. Silver added 0.8% to $90.11, after ending Monday 4.7% lower. Platinum and palladium were little changed. The Bloomberg Dollar Spot Index, a gauge of the US currency, was flat after ending the previous session 0.7% higher.
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