Gold Erases Week's Plunge at $4500 as Iran War Worsens

The GOLD PRICE rallied further on Friday as Israeli warplanes bombed Beirut and Iranian missiles hit the Saudi capital, regaining the $4500 level despite news that major central-bank gold buyer Turkey has sold and borrowed against some of the nation's bullion reserves to raise cash.

Global stock markets fell hard yet again, taking the US S&P500 index 6.7% lower from the last day of February − eve of the US-Israeli airstrikes on Tehran − as crude oil leapt once more amid reports of shortages and panic petrol buying worldwide.

"It takes two to TACO, and Trump's sensitivity to higher energy prices is well understood in Tehran," says a commodities note from French investment bank Natixis following the US President's latest 'chickening out' offer to delay attacking the Islamic Republic's energy infrastructure for another 10 days. 

With central bank gold selling already making headlines this week, Bloomberg analysis of Turkey's latest weekly international reserves data said yesterday that the world's 11th largest national gold holder sold or swapped around 60 tonnes of bullion to raise around $8 billion during the first 2 weeks of this month.

That marked the steepest drop in the Central Bank of the Republic of Turkey's gold reserves since mid-2018, and it took Ankara's official gold holdings down to a 13-month low around 772 tonnes.

"The ramifications of high oil," said bullion bank HSBC's precious metals analyst Jim Steel last week, "especially as regards strains on foreign exchange holdings for non-oil producing countries, increased defense spending and geopolitical risks and the potential for enhanced revenue from still high gold prices, may encourage further official sector selling."

The Turkish central bank gold-selling news confirmed rumors about the CBRT reported on Wednesday by German financial group Deutsche Bank.

"Gold fell below $4400 [yesterday] following the Bloomberg report," says Bruce Ikemizu, former ICBC Standard Bank Tokyo manager and now CEO of the Japan Bullion Market Association.

"But most of the CBRT's reduction was due to time-limited swaps of gold for foreign currency or Lira.

"In other words, it amounts to borrowing currency using gold as collateral for a fixed period. [So] the market reaction may have been excessive."

Rallying through $4500 per Troy ounce at London's 3pm auction today, gold bullion cut its loss for the week to $50, albeit with the lowest Friday finish since the first week of January.

"Although gold prices have fallen by around 15% this month on higher-for-longer interest rate expectations, longer term demand remains supported," says a note from giant Chinese bank ICBC's precious metals team.

"Hong Kong is inviting several China-friendly central banks to participate in its gold clearing system as part of efforts to elevate the city as a major bullion trading hub. Meanwhile, Singapore is planning to expand its gold storage capacity to become a custodian for bullion held by foreign central banks, reinforcing gold’s role as a strategic reserve asset amid elevated global uncertainty."

Silver had earlier erased its prior loss for the week, trading back above $72.30 per Troy ounce while fellow industrial precious metals platinum and palladium struggled to regain last Friday's levels.