Gold Rises as Dip-Buyers Return After Israel-Lebanon Ceasefire

dlk8gz0k{t7d5x8p1ek}9khu_media_dl_1.png Bloomberg

Article content

(Bloomberg) — Gold pushed higher after Israel and Lebanon agreed to a conditional ceasefire, a possible step toward resolving the wider Middle East conflict that’s upended global energy markets and raised inflation risks.

Article content

Bullion rose as much as 1% to top $4,475 an ounce, largely reversing a decline in the previous session, as dip-buyers returned to the market. In a joint statement with the US, Israel and Lebanon said their deal was contingent on “a complete cessation” of fire from Iran-backed Hezbollah. 

Article content

Article content

Article content

The agreement is the latest attempt by Washington to keep peace talks with Iran on track, and follows renewed fighting on Wednesday that marked the most serious flare-up since a ceasefire went into effect in April. Kuwait and Bahrain were caught in the crossfire as the strikes threatened to derail negotiations.

Article content

Article content

While Washington and Tehran have largely agreed a rough framework to extend their ceasefire and reopen the Strait of Hormuz, a final agreement has proven elusive. US President Donald Trump said the key waterway would open “immediately” upon Iran signing a memorandum of understanding, but Tehran has balked at American peace terms.

Article content

The protracted disruption to energy flows via Hormuz has driven oil prices higher and raised concerns around global inflation, making central banks more likely to keep interest rates steady or even raise them — a headwind for precious metals, which don’t pay interest.

Article content

Bullion has moved largely in an inverse relationship with oil since the conflict began in late February. It fell sharply in the early days of the conflict and remains about 15% below its immediate pre-war level, though it has traded in a narrow range for the last few weeks. After three days of gains, oil slipped on news of the Israel-Lebanon deal.

Article content

Article content

For gold, hopes for an Israel-Lebanon ceasefire “have eased near-term pressure from yields and the dollar, while bullion’s pullback toward a long-term trend line is drawing dip-buyers back in,” said Hebe Chen, an analyst at Vantage Markets in Melbourne.

Article content

Without a more comprehensive resolution to the conflict, however, inflationary pressures are set to persist. Federal Reserve Bank of Dallas President Lorie Logan said officials may need to raise interest rates later this year to bring inflation back to the US central bank’s 2% target.

Article content

“As inflation concerns continue to see expectations of a Fed hike priced in by at least early 2027, gold is finding it hard to muster any serious recovery,” TD Securities analysts Ryan McKay and Bart Melek said in a note.

Article content

Spot gold rose 0.6% to $4,460.20 an ounce as of 11:45 a.m. in Singapore. Silver climbed 0.8% to $73.34 an ounce. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed after ending the previous session 0.3% higher.

Article content