Gold erases gains to trade flat

Spot gold traded largely flat at $5,142.98 an ounce, after rising around 1% to $5,195.41 earlier in the day

Gold prices erased early gains to trade flat on Thursday as the U.S. dollar rebounded after a modest pullback, while the Middle East war supported bullion’s safe-haven appeal.

Spot gold traded largely flat at $5,142.98 an ounce by 06:31 GMT, after rising around 1% to $5,195.41 earlier in the day,

U.S. Gold Futures added 0.3% to $5,149.75/oz.

The yellow metal advanced 1% in the previous session. The rebound followed a near 5% pullback on Tuesday when a stronger dollar weighed on prices.

The U.S.-Iran war has deepened fears of a sustained war, prompting investors to reduce exposure to risk-sensitive assets and flock to gold, which is traditionally viewed as a hedge against geopolitical instability and market turbulence.

Adding to uncertainty, Tehran dismissed as “pure falsehood” a report that its Ministry of Intelligence had reached out to Washington to negotiate an end to the war.

The inflationary impact of the Middle East war, via sharply higher energy prices, could reinforce expectations of higher interest rates for longer — a headwind for non‑yielding assets such as gold, ING analysts said in a note.

However, elevated geopolitical uncertainty continues to support a risk premium, helping to underpin prices despite the challenging rates backdrop, they added.

The US Dollar Index added 0.4% during Asian hours after slipping 0.3% overnight. It posted two consecutive sessions of strong gains at the start of the week.

Among other precious metals, silver prices dropped 2% to $81.97 per ounce, while platinum declined 1.2% to $2,137.60/oz. Both metals had gained more than 2% in early trade.