Gold Rally Stalls as Geopolitical Tensions Shift Market Dynamics

Gold's 4-day streak ends as Trump's Iran speech boosts dollar & oil. Focus shifts to US jobs data. Mixed institutional sentiment persists despite gold's YTD gains.

The four-day winning streak for gold came to a sudden halt on Thursday. A speech by U.S. President Donald Trump regarding the Iran conflict, which introduced fresh uncertainty, triggered the reversal. While the precious metal faced selling pressure, crude oil prices and the U.S. dollar posted significant gains.

Macroeconomic Data Takes Center Stage

Following recent geopolitical turbulence, investor focus is shifting back to macroeconomic indicators. According to CME data, futures markets are currently not pricing in an interest rate cut for April. Consequently, upcoming U.S. economic releases are under intense scrutiny:

• April 3: Initial Jobless Claims
• April 4: Nonfarm Payrolls (U.S. employment report)
• April 4: U.S. Unemployment Rate and Services PMI

The U.S. stock market will be closed on Friday for the Easter holiday. Analysts note that any escalation of tensions in the Strait of Hormuz over the weekend could reignite inflation expectations through higher energy costs, potentially further limiting central banks' flexibility regarding future monetary policy moves.

Dollar Strength and Oil Surge Weigh on Gold

In his address, President Trump suggested a swift end to military operations against Iran but provided no concrete timeline. Simultaneously, he promised "extremely hard" new sanctions in the coming weeks. This ambiguous outlook propelled prices for Brent North Sea crude and U.S. benchmark WTI oil upward by approximately eight percent.

Concurrently, the U.S. dollar appreciated noticeably against the euro. A stronger greenback typically makes dollar-denominated gold more expensive for holders of other currencies. This currency effect drove the LBMA gold spot price down by over $110 during the session, with quotes briefly falling to $4,554. A report from the Middle East prevented a steeper decline, indicating that Iran is currently working on a protocol with Oman to monitor shipping traffic through the Strait of Hormuz.

Institutional Sentiment Presents a Mixed Picture

The landscape among large-scale investors appears divided. While global gold-backed ETFs recorded net inflows for a ninth consecutive month in February, more recent reports point to initial capital outflows and growing investor caution.

Momentum among the world's central banks also shows signs of a slight cool-down. Their net purchases in January totaled five tonnes, significantly less than the prior year's average. However, the buyer base is broadening, with countries like Malaysia and South Korea adding to their reserves after a prolonged pause. Despite the current price pullback, gold maintains a year-to-date gain of roughly six percent.