XAU/USD rose above $4,100 amid the ongoing Strait of Hormuz conflict. The bullion has regained strength after recovering from the psychological level of $4,000, driven by increased demand for safe-haven assets.
At 9 am, gold was trading at $4,114, up 0.91% since it opened early Wednesday in Asian trading
The gold price recovery comes as geopolitical tensions between the United States (US) and Iran continue to escalate. The ongoing conflict has increased market uncertainty, prompting investors to return to buying gold as a safe-haven asset.
Analysts, however, believe that this rise is not driven by new developments, but rather by buying activity after gold prices have previously declined. Market fundamentals are still not seen to have changed much.
In the latest developments, the US Central Command (CENTCOM) reportedly continued its 11th consecutive night of strikes on Iran after President Donald Trump declared the ceasefire had ended.
At the same time, Iran reportedly increased attacks on US military assets in the Middle East, while the Houthi group announced a maritime embargo on Saudi Arabia.
The market is now focused on the impact of the conflict on global energy prices. If oil prices continue to rise and push inflation higher, the US Federal Reserve (Fed) may have to maintain tight monetary policy for longer.
Although recent US inflation data shows that price pressures are easing, the market still expects the Fed to implement at least one more interest rate hike before the end of the year.
This development is expected to continue to be a major factor influencing the direction of gold prices in the near term.
