Gold: Gold (GC=F) extended a three-day rally on signals that the war in the Middle East may be nearing resolution, with traders shifting focus from interest-rate hikes to the longer-term risk of economic downturn.
According to National News Agency - Lebanon, bullion rose as much as 1.2% to top $4,700 an ounce, adding to a 3.5% jump in the previous session before later paring gains. President Donald Trump said he expected the US to end the war with Iran within two to three weeks, suggesting that America had largely accomplished its military goals and would leave others to reopen the Strait of Hormuz.
Equities rallied and the US dollar fell. Bond traders are reducing bets that central banks will hike rates to tame inflationary risks arising from the conflict, turning instead to the war's impact on economic growth. Federal Reserve Chair Jerome Powell said earlier this week that longer-term inflation expectations remain anchored.
"Gold's safe-haven appeal tends to re-emerge when the narrative shifts from inflation to growth risk," said Yuxuan Tang, Asia head of rates and FX strategy at JPMorgan Private Bank. "We hold a high conviction that the Federal Reserve has limited bandwidth to raise rates this cycle" and will instead focus on the strained labor market, she said. Lower rates are a tailwind for gold, which doesn't pay interest.
Despite the rebound in the past few days, bullion's near-12% decline in March was its worst monthly performance since October 2008. The Middle East war, now in its fifth week, has upended global markets and choked supplies of energy and other goods, triggering concerns about a spike in inflation that outweighed gold's traditional appeal as a haven.