Gold rises after report of oil-stockpile release to ease shock

[SINGAPORE] Gold advanced after a report that the International Energy Agency (IEA) is proposing the largest-ever release of oil reserves to ease a demand shock caused by the war in the Middle East.

Bullion pushed above US$5,200 an ounce, having gained 1 per cent in the previous session. The IEA proposal, which was reported by The Wall Street Journal, envisages a release in excess of the 182 million barrels that followed Russia’s invasion of Ukraine in 2022. Crude prices gave up earlier gains, while a gauge of the US dollar slipped as much as 0.1 per cent.

As the US-Israeli war in Iran entered its 12th day, investors were also digesting conflicting messages from American officials. The White House said that the US had not escorted an oil tanker through the Strait of Hormuz, contradicting a now-deleted social media post by Energy Secretary Chris Wright. Shipping has all but stopped through the waterway that’s typically a conduit for a fifth of the world’s oil and liquefied natural gas.

For gold, the extreme volatility in energy prices has increased concerns over inflation, in turn reducing expectations that the US Federal Reserve and other central banks will be able to cut interest rates. Higher borrowing costs are a headwind for precious metals, which do not pay interest. Bullion, which has gained around a fifth this year, is also a source of liquidity used by investors to shore up other parts of their portfolios.

Since war broke out, the volume of gold held by exchange-traded funds has declined. Total holdings fell by nearly 30 tonnes last week, marking the biggest weekly selloff in more than two years, according to data compiled by Bloomberg.

The precious metal, however, has held above the US$5,000-an-ounce level, finding some support as a haven asset during a period of geopolitical and trade upheaval.

“Overall, I think it’s worth buying gold on weakness,” said Alexandre Carrier, portfolio manager at the DNCA Invest Strategic Resources fund.

Meanwhile, the war continues to disrupt crude production and refining across the Middle East. The US and Israel conducted their most intense day of attacks yet against Iran and won’t give up until the Islamic Republic is beaten, the Pentagon said on Tuesday, striking a more aggressive tone after US President Donald Trump’s earlier indication that the conflict could end soon.

Traders have also pared the amount of Fed policy easing they expect this year ahead of data due Wednesday that’s projected to show February inflation remained well above the central bank’s target, even before the fighting erupted.

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Spot gold rose 0.5 per cent to US$5,218.42 an ounce as at 9.17 am in Singapore. Silver added 0.7 per cent to US$88.92. Platinum gained 1 per cent and palladium was up 1.3 per cent. The Bloomberg Dollar Spot Index slipped 0.1 per cent. BLOOMBERG