Precious Metals Rise on Safe-Haven Demand

Gold prices recovered from an opening gap down and silver rallied to a two-month high as escalating geopolitical tensions in the Middle East fueled strong safe-haven demand. Analysts noted, however, that gains for gold were being capped by persistent fears of a higher-for-longer interest rate stance from the US Federal Reserve.

Faltering Middle East Peace Talks Drive Oil and Risk Aversion

Market sentiment soured as hopes for a Middle East ceasefire faded, with reports indicating the United States rejected an Iranian peace proposal, leading to a more cautious and risk-averse tone across financial markets. The deadlock contributed to a sharp increase in oil prices and supported the US Dollar as traders moved toward safety.

US Dollar Strengthens as Traders Eye Inflation Data

The US Dollar Index found support from geopolitical instability and a previously strong jobs report, though it surrendered some initial gains. Market participants are now focused on upcoming US Consumer Price Index (CPI) data, which is expected to provide clarity on the inflation trend and influence the Federal Reserve's policy path, with some economists anticipating an extended pause on rate cuts.

Global Central Banks Navigate Divergent Policy Paths

Major central banks continue to grapple with unique domestic challenges, with Japanese authorities reportedly intervening to support the Yen and the European Central Bank facing projections of higher inflation and further rate hikes. Meanwhile, the British Pound showed resilience despite political shocks and a slowing growth forecast, as the Bank of England remains vigilant about upside inflation risks.