Gold rebounded on Tuesday as a weaker U.S. dollar supported bullion, but the Middle East conflict keeps energy supply, inflation and rate-hike worries in play. Gold has fallen around a fifth since the U.S.-Iran war began in late February.
Gold traded near $4,160 an ounce on Tuesday after ending the previous session 0.5% lower. A weaker U.S. dollar supported the metal. Escalating conflict in the Middle East, however, continued to raise concerns over energy supply disruptions, persistent inflation and the prospect of further interest-rate hikes.
Conflict pressures energy and rates
Brent crude approached $106 a barrel as attacks by Iran-backed Houthi forces on Saudi Arabia's main airport increased pressure on Washington to provide further support to its regional ally. Saudi Arabia extended the suspension of operations at King Khalid Airport until Saturday after repeated Houthi attacks that killed at least 18 people.
The spreading conflict has raised concerns that further disruptions to energy supplies could push oil prices higher and prolong inflationary pressures. As a result, gold has fallen around a fifth since the war erupted, as the conflict fuelled global inflation concerns and contributed to tighter monetary policy.
Why higher rates weigh on bullion
Higher borrowing costs typically weigh on gold because the non-yielding metal becomes less attractive relative to interest-bearing assets. Persistent inflation and heavy government borrowing have also kept interest rates and bond yields elevated, further limiting bullion's appeal.
Technical levels point to selling pressure
On the daily chart, gold futures were trading at $4,115.70, below key resistance at $4,238.21. That signals bearish pressure that could push futures to test immediate key support at $4,128.05, where a breakdown could trigger selling.
On the one-hour chart, a breakdown below immediate key support at $4,165 could keep futures under selling pressure in today's session.
Source: Investing.com
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