Gold rises as buying interest counters concern over Strait of Hormuz clash

[SINGAPORE] Gold rose as signs of buying interest emerged in the wake of strong purchases by China’s central bank, even as fresh clashes in the Middle East threatened to fracture a fragile ceasefire.

Bullion traded near US$4,720 an ounce, after ending the previous session marginally lower. The US struck military targets in Iran after the country fired on three navy destroyers sailing in the strait.

The clashes heightened tensions as the US tries to exit a war now in its third month, and while it is waiting for Iran to respond to its proposal to reopen the Strait of Hormuz, a vital waterway for energy flows.

There are signs that central bank demand, a major contributor to gold’s multiyear rally, may continue. The People’s Bank of China (PBOC), among the biggest official sector buyers of the precious metal, bought eight tonnes in April, data released on Thursday (May 7) show. That put last month’s purchases at the highest since 2024.

PBOC’s extension of a buying streak “can be encouraging for Asian buyers”, said Ahmad Assiri, an analyst at Pepperstone Group. “What we see for now is early positioning for the potential rally” to follow once the worst of the Middle East conflict is over, he said.

Gold has fallen around 11 per cent since the conflict erupted, as the near-closing of Hormuz and resulting energy price shock fanned concerns about rising inflation that would keep interest rates higher for longer. Higher rates and a stronger US currency are negative for bullion as it pays no interest and is priced in the greenback.

Traders will be tracking the change in US non-form payrolls due for release later Friday for clues on the trajectory of rates. Some US Federal Reserve officials have played down the prospect on an eventual return to monetary easing, as the statement after last week’s monetary policy meeting suggested, given the war is clouding the economic outlook and creating uncertainties.

Spot gold rose 0.8 per cent to US$4,721.05 an ounce as at 11.28 am in Singapore, and was up 2.3 per cent for the week. Silver climbed 1.8 per cent to US$79.84, while platinum and palladium advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, added 0.1 per cent, but was down 0.2 per cent this week. BLOOMBERG