Gold and silver rose on dip-buying, as traders monitored Middle East tensions for signs that higher energy costs could stoke inflation, putting pressure on the Federal Reserve to tighten policy.
Bullion advanced as much as 1.9% to trade above $4,080 an ounce, while silver jumped as much as 5% — the most in more than five weeks — to just below $60 an ounce. That followed two straight weeks of losses for the precious metals.
Traders are weighing higher energy prices against soft US economic data, as they look for clues on the Fed’s path for interest rates. Elevated borrowing costs are a headwind for non-yielding bullion. Oil climbed as the US and Iran exchanged strikes for a 10th straight day, even as mediators sought to revive a truce between the two countries.
Despite the latest tensions, bullion is showing some signs of support at the key psychological level of $4,000 an ounce, an indication of the resistance that was also seen last week. Silver has hovered either side of $60 an ounce since late June.
“Today’s move looks more like dip-buying than a response to new headlines. The geopolitical backdrop remains supportive for precious metals, but silver is outperforming because it’s benefiting from both safe-haven demand and stronger sentiment across industrial metals as copper rallies,” said Ewa Manthey, commodities strategist at ING Bank N/V.
The US-Iran war helped to end a multiyear bull run for both metals. Gold has fallen more than a quarter from its January peak of close to $5,600 an ounce, while silver has fallen by more than half from a short-lived high of over $120 an ounce.
“After 18 days’ horizontal movement there has almost certainly been some fresh buying interest,” said Rhona O’Connell, head of market analysis at StoneX Financial Ltd. Still, gold “has a mighty bearish technical construction,” and it would be a surprise to see it break higher, she added.
Spot gold was 1.2% higher at $4,056.75 an ounce as of 1:53 p.m. in London. Silver was 4.6% higher at $59.02 an ounce. Platinum and palladium also rose, while the Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed.
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