Gold prices edged up in early Tuesday trading but remain below $5,200. Despite the ongoing war in Iran, which has raised geopolitical risk and triggered a spike in energy prices that has brought inflation back to the centre of attention, the safe-haven metal has struggled to consolidate any gains since the start of the conflict. The increase in energy prices and its inflationary impact have reduced expectations for Fed rate cuts, strengthening the US dollar and pushing Treasury yields higher, which in turn has weighed on non-yielding gold. At the same time, heavy losses in equity markets added pressure on bullion, as many investors were forced to sell gold in order to meet margin requirements elsewhere. This week, risk appetite has returned following statements from the US President hinting at the possibility of the conflict winding down in the near term. Investment flows towards equities, as many investors see an opportunity to buy the dip, have capped the upside for the precious metal, which has otherwise benefited from the fading momentum of the dollar rally. Against this backdrop, gold traders are holding back from placing large trades, waiting for greater clarity on developments related to the war in Iran as well as on key US inflation data due for release later in the week.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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