Gold prices rebounded in Asian trading on Wednesday, recovering part of the sharp losses recorded in the previous session as investors returned to safe-haven assets amid escalating tensions in the Middle East.
By 3:05 pm AEDT (4:05 am GMT), spot gold was up 1.7% at US$5,176.57 per ounce, after briefly retesting the $5,200 level earlier in the session.
The recovery mirrored price action seen during Tuesday’s Asian hours, with renewed geopolitical concerns helping offset pressure from a firm U.S. dollar and shifting expectations around U.S. monetary policy.
The latest bounce followed a heavy sell-off on Tuesday, when gold settled 4.4% lower as investors unwound positions in the precious metal to cover losses in global equity markets.
Despite the rebound, the U.S. dollar remained broadly supported, underpinned by rising geopolitical risks and fading expectations of near-term interest rate cuts from the Federal Reserve.
A moderation in oil’s rally also contributed to gold’s stabilisation. Crude prices consolidated after President Donald Trump sought to reassure markets that the United States would provide insurance for vessels operating in the Gulf amid Iranian attacks.
Trump added that U.S. military forces would escort ships through the Strait of Hormuz if necessary to ensure safe passage.
Analysts at ANZ said: "Inflationary risks from rising energy prices amid the U.S.-Iran conflict are raising concerns that central banks may be forced to hold rates steady or even hike them in coming months.
"Gold also came under pressure from a deepening sell-off in equity markets, which forced some investors to liquidate positions in gold to meet margin calls."
Gold’s sharp fall on Tuesday was compounded by mounting concerns that higher energy prices could lift inflation projections, thereby reducing the likelihood of further policy easing by the Fed in the near term.
With markets reassessing the outlook for U.S. interest rates, the dollar has held firm, limiting the upside for non-yielding assets such as gold.
Attention now turns to upcoming U.S. economic data, including the ADP Employment Change and ISM Services PMI reports.
