Gold Prices Ease as Stronger Dollar Weighs Despite Middle East Tensions
Gold prices moved slightly lower on Thursday, pressured by profit-taking and a stronger U.S. dollar, even as escalating tensions in the Middle East conflict continued to support demand for safe-haven assets.
At 12:05 ET (17:05 GMT), spot gold declined 1.1% to $5,087.63 per ounce, while U.S. gold futures slipped 0.8% to $5,095.96 per ounce.
Despite the daily decline, the precious metal remains on a strong upward trajectory. Gold rose about 1% in the previous trading session and has gained nearly 20% since the beginning of the year, supported by persistent geopolitical uncertainty and market volatility.
Middle East Conflict Continues to Support Gold
Geopolitical tensions remain high following reports that the United States sank an Iranian warship in international waters, while Iran continued launching missiles across several countries in the region and allegedly targeted key energy infrastructure.
The escalating conflict has increased fears of a prolonged regional war, encouraging investors to shift away from risk-sensitive assets and move into gold, which is traditionally viewed as a hedge against geopolitical instability and financial market turbulence.
However, analysts say gold currently faces conflicting macroeconomic forces.
According to analysts at ING, the conflict could lead to higher energy prices, which may increase inflationary pressures. This scenario could prompt central banks to keep interest rates higher for longer, creating headwinds for non-yielding assets like gold.
At the same time, continued geopolitical uncertainty adds a risk premium to gold prices, helping support the metal despite the challenging interest-rate environment.
Stronger Dollar Limits Gold’s Momentum
Market participants are also closely watching movements in the U.S. Dollar Index (DXY). The index rebounded on Thursday after falling 0.3% overnight, following two consecutive sessions of strong gains earlier in the week.
A stronger dollar typically makes gold more expensive for investors using other currencies, which can reduce demand and weigh on prices.
Morgan Stanley strategists led by Amy Gower noted that geopolitical uncertainty usually benefits safe-haven assets such as gold. However, recent price movements have been more mixed due to the strength of the U.S. dollar.
Multiple Factors Driving Gold Prices
Several factors are currently influencing gold market dynamics, including expectations about Federal Reserve interest-rate policy, currency fluctuations, geopolitical risks, and global liquidity conditions.
Analysts believe that the recent decline in gold prices may reflect investors raising cash during periods of market stress, rather than a fundamental change in sentiment toward the metal.
Morgan Stanley strategists said gold’s recent underperformance is likely temporary, suggesting that continued geopolitical uncertainty could support prices if tensions persist.
Precious Metals and Copper Markets
Elsewhere in the metals market, silver prices fell 1.6% to $82.1880 per ounce, while platinum remained largely unchanged at $2,152.80 per ounce.
In the industrial metals sector, London Metal Exchange copper futures rose 0.8% to $13,057.50 per ton, while U.S. copper futures declined 1% to $5.8457 per pound.
