Gold advanced for a fifth consecutive session as escalating military conflict in the Middle East disrupted energy markets and intensified global risk aversion. Bullion climbed as much as 1.1% to trade above $5,380 per ounce, extending a rally of more than 3% over the previous four sessions and pushing prices closer to the all-time highs reached in January.

The renewed bid for safety follows expanded US and Israeli strikes on Iranian targets and retaliatory actions affecting oil and gas infrastructure, including threats to shipping through the Strait of Hormuz. The resulting surge in crude prices has reawakened inflation concerns, shifting market expectations around US monetary policy and reinforcing gold’s traditional role as a hedge against instability.

Energy Shock and the Fed Dilemma

The spike in oil prices has fed directly into inflation expectations, pressuring US Treasuries and prompting traders to push back expectations for Federal Reserve easing. Markets now see the next potential rate cut around September, later than previously anticipated.

Higher interest rates typically weigh on non-yielding assets such as gold. However, the current environment presents a more nuanced dynamic. When rising rates reflect inflation risks rather than economic strength, gold can benefit as investors seek to preserve purchasing power.

Recent data suggest inflation pressures were already building. Manufacturing input prices surged in February at the fastest pace since 2022, according to the Institute for Supply Management. Meanwhile, JPMorgan Chase CEO Jamie Dimon warned that inflation could reemerge as a disruptive force for the US economy. These signals amplify gold’s appeal amid policy uncertainty.

Debasement Trade and Structural Tailwinds

Gold has gained nearly 25% year-to-date, supported by geopolitical tensions, persistent trade frictions, and growing debate over central bank independence. A broader rotation out of bonds and fiat currencies — often described as the “debasement trade” — has provided additional momentum to bullion’s multi-year advance.

Some analysts argue there is “ample scope” for gold to challenge its January record above $5,595 if the conflict drags on for several weeks. Extended instability could sustain elevated energy prices and prolong safe-haven flows into precious metals.

However, market strategists caution that geopolitical-driven rallies are often front-loaded. If tensions stabilize and energy markets normalize, gold could lose part of its recent upward momentum as risk appetite gradually returns.

Short-Term Volatility, Long-Term Positioning

Spot gold traded around $5,366 in late Asian hours, with silver rebounding modestly after sharp prior losses. The US dollar remained broadly steady following a recent advance, adding another variable to precious metals pricing.

The key variable now is duration. A short-lived escalation may limit the rally to a volatility-driven spike. A prolonged conflict, particularly one that materially disrupts oil supply, could embed higher inflation expectations and strengthen gold’s structural bid.

For investors in both the US and Israel, gold’s recent surge underscores the asset’s renewed strategic role within diversified portfolios. Whether the metal breaks to new highs will depend less on daily headlines and more on how energy markets, inflation data, and central bank policy evolve in the weeks ahead.