Gold prices held onto recent gains on Thursday, supported by persistent dip-buying even as geopolitical tensions in the Middle East drove oil prices to multiweek highs.
The surge in crude costs has rekindled market concerns that rising energy bills could feed into broader US inflationary pressures, potentially compelling the Federal Reserve to consider raising interest rates rather than cutting them.
The precious metal’s resilience highlights a tug-of-war between two opposing macroeconomic forces.
On one hand, the safe-haven appeal of gold remains strong amid escalating hostilities, attracting investors seeking protection against geopolitical instability.
On the other hand, the prospect of higher interest rates poses a significant headwind for non-yielding assets, as rising borrowing costs typically strengthen the dollar and increase the opportunity cost of holding gold.
Recent US data had indicated that inflationary pressures were easing, which had previously weakened the case for holding non-yielding assets like gold.