Gold Rises as Traders Weigh China Buying, Trump’s Iran DeadlineAI Quick ReadGold rose, following a two-day decline, as traders weighed China’s buying of the precious metal against the impact of a protracted war in the Middle east on economic growth and inflation.
Bullion reversed an earlier decline to gain as much as 1%, after Chinese data showed the central bank bought the most gold in more than a year in March, increasing its reserves for a 17th straight month. A weakening of the US dollar also gave gold a boost, as it makes bullion more affordable for most buyers.
Investors are also weighing the developments in the Middle east. US President Donald Trump set a deadline of 8 p.m. Eastern Time Tuesday to reach a deal with Tehran or begin attacking power plants and bridges, raising the stakes in a conflict that’s caused a global fuel squeeze and stoked inflation fears.
Now in its sixth week, the war has heightened the prospects that central banks will delay cutting interest rates or even hike them. Bond traders expect the Federal Reserve to keep rates steady through the rest of the year. Higher borrowing costs weigh on gold as the metal doesn’t pay interest.
Gold has fallen about 11% since the conflict in the Middle East began at the end of February, with the metal’s traditional haven appeal also weakened by the need for investors to liquidate positions to cover losses elsewhere. The metal has moved largely in an inverse relationship with oil.
Meanwhile, China’s accelerated gold purchases also helped to bolster confidence in the market, at a time when some other central banks have turned to sales. In March, Turkey’s central bank sold and swapped about 60 tons, worth more than $8 billion, to defend the lira.
As bullion has declined, there are also signs that dip-buyers are slowly adding back their positions. Holdings by gold-backed exchange-traded funds rose last week for the first time since the war began, according to a calculation by Bloomberg.
Trump insisted in a media conference Monday that the Strait of Hormuz would have to be reopened as part of any deal with Iran to end the war. The maritime chokepoint linking the Persian Gulf to global markets has remained largely closed to shipping since the conflict began.
Tehran has so far rejected US proposals for ending the war and warned it would respond to more strikes by ramping up its own attacks in the Middle East.
Spot gold rose 0.4% to $4,667.00 an ounce at 10:45 a.m. London time. Silver was edged down 0.3% to $72.58. Platinum was trading lower, while palladium rose. The Bloomberg Dollar Spot Index, a gauge of the US currency, was down 0.2%.
With assistance from William Clowes.
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