Gold steadies near $4,120 despite Red Sea oil inflation fears
Bullion is finding support at the $4,000 level even as fresh Houthi attacks on Red Sea tankers push oil prices higher and complicate the Federal Reserve's interest rate path.
Gold stabilized around $4,120 an ounce on Wednesday as dip-buying absorbed the inflationary shock from new attacks on commercial shipping in the Red Sea. Spot gold was 0.2% lower at $4,120.28 as of 7:35 a.m. in Singapore, holding onto a 3% gain accumulated over the previous two sessions.
The immediate catalyst for the latest energy price surge is an escalation in the months-long Middle East conflict. Yemen’s Iran-backed Houthis claimed responsibility for strikes on tankers transiting the Red Sea, marking the first such attacks since hostilities intensified in late February. This waterway serves as a critical alternate route for Saudi Arabian crude oil currently blocked behind the Strait of Hormuz, while both the US and Iran signal they are not ready to negotiate.
Higher energy costs typically drag on non-yielding bullion by reinforcing expectations that the Federal Reserve will keep borrowing costs elevated to combat inflation. However, traders are currently weighing those inflationary pressures against softer US economic data, leaving the central bank's next move unclear. The Bloomberg Dollar Spot Index was flat after ending the previous session largely unchanged, reflecting this macroeconomic indecision among market participants.
This dynamic has altered gold's recent trading behavior. The metal had largely moved inversely to Treasury yields since the US and Israel launched strikes on Iran in late February. It has since shed roughly a fifth of its value after hitting a record high near $5,600 the month prior.
Despite that prolonged drawdown, the metal's ability to hold above $4,000 this week suggests investors are increasingly viewing that threshold as a firm support level. The rest of the precious metals complex edged lower, with silver sliding 0.4% to $59.50 an ounce and platinum and palladium also retreating.
