Gold prices rose 2% on Wednesday, rebounding from a more than one-week low hit previously. The surge was fuelled by a weakening dollar and escalating Middle East tensions, boosting safe-haven demand for the precious metal.
Spot gold XAU= gained 1.8% to $5,175.39 per ounce by 0925 GMT. U.S. gold futures GCcv1 for April delivery added 1.2% to $5,186.90.
The U.S. dollar fell 0.1%, making greenback-priced gold more affordable for buyers using other currencies.
“After the past few days of position unwinds and dollar strength, markets are back to a more typical macro risk-off stance, with silver higher too. A pause in the rise of the dollar and Treasury yields helps with their opportunity costs,” said Jamie Dutta, market analyst at Nemo.money.
“Gold and silver’s safe-haven characteristics can shine again,” Dutta added.
Gold fell more than 4% on Tuesday, as investors piled into the dollar and inflation concerns dimmed bets on interest rate cuts, which could lower the opportunity cost of holding the metal.
Spot silver XAG=, meanwhile, advanced 4.5% to $85.74 per ounce on Wednesday, after falling more than 8% in the last session.
U.S. forces continued a round-the-clock assault on Iran, and Israel mounted a “broad wave” of strikes on Wednesday, targeting Iranian missile sites and air defence systems.
Asian stocks tanked, as investors dumped crowded bets on chipmakers on worries that the widening Middle East war will drive an oil shock that raises inflation and delays interest rate cuts.
Investors widely expect the U.S. Federal Reserve to hold rates at the end of its next two-day meeting on March 18, according to the CME Group’s FedWatch tool.
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“If the military campaign prolongs or expands across the region, safe-haven demand could continue to support gold above the $5,000/oz level and potentially open the door for a retest of the recent highs,” said Linh Tran, senior market analyst at XS.com.
In other metals, spot platinum XPT= added 3.7% to $2,159.45 per ounce, while palladium XPD= gained 3% to $1,697.08.