Quick overview

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Gold prices rallied following significant purchases by China’s central bank, even though new conflicts in the Middle East threatened to shatter a precarious ceasefire.  The yellow metal was trading close to $4,720 per ounce after closing the previous session slightly lower.

The US attacked military targets there after Iran opened fire on three navy destroyers passing through the strait,

The clashes heightened tensions as the United States seeks to end a war that is now in its third month and awaits Iran’s response to its proposal to reopen the Strait of Hormuz, a vital waterway for energy flows.

There are indications that central bank demand, which has played a significant role in the multiyear increase in gold prices, might persist. According to data released on Thursday, the People’s Bank of China, one of the largest official sector purchasers of the precious metal, purchased 8 tons in April. As a result, last month’s sales reached their highest level since 2024. Ahmad Assiri, an analyst at Pepperstone Group Ltd., stated that the PBOC’s continuation of a buying run “can be encouraging for Asian buyers.”.

He stated that “what we see for now is early positioning for the potential rally” that may occur after the worst of the Middle East conflict has passed. Since the conflict began, gold has dropped about 11% as worries about rising inflation that would prolong higher interest rates were heightened by the near-closure of Hormuz and the ensuing shock to energy prices.

Higher rates and a stronger US dollar are detrimental since bullion is priced in US dollars and pays no interest.