Gold Climbs as IEA Weighs Historic Oil Reserve Release to Counter War Shock
(Bloomberg) -- Gold prices pushed higher on Tuesday, finding momentum after a report indicated that the International Energy Agency is considering an unprecedented release of strategic petroleum reserves to cushion the economic impact of the ongoing Middle East war.
The proposal, first reported by The Wall Street Journal, would surpass the 182-million-barrel coordinated release triggered by Russia's invasion of Ukraine in 2022. In response, crude oil futures relinquished earlier gains, and the U.S. dollar edged lower. Spot gold rose 0.5% to $5,218.42 an ounce in Asian trading, holding firmly above the psychologically key $5,000 level.
The market is navigating a complex web of geopolitical and economic signals. As the conflict between a U.S.-Israeli coalition and Iran entered its twelfth day, confusion followed contradictory statements from Washington regarding military escorts for tankers in the vital Strait of Hormuz. Transit through the chokepoint, which handles about 20% of global seaborne oil, has nearly halted.
Analysts note that the extreme volatility in energy markets has reignited inflation anxieties, compelling investors to reassess the timeline for potential interest rate cuts by the Federal Reserve. "The narrative of 'higher for longer' rates is getting a second wind from oil price spikes," said Marcus Thorne, a senior strategist at Veritas Capital in London. "This typically pressures gold, but its role as a geopolitical hedge and a source of portfolio liquidity is overriding that dynamic for now."
Evidence of this dual role is clear. While holdings in gold-backed exchange-traded funds saw their largest weekly outflow in over two years, shedding nearly 30 tons last week, direct bullion buying has supported the price. "The ETF sell-off likely represents tactical rebalancing, not a loss of faith in gold," added Thorne. "In times of tangible crisis, physical metal often trumps paper claims."
The IEA's potential intervention marks a critical attempt to prevent an energy-led inflationary spiral. However, with attacks disrupting production and refining across the region, the war's sustained pressure on supply chains remains a dominant market force. Traders have already scaled back bets on Fed easing this year, a move expected to be reinforced by Wednesday's inflation data, which is forecast to show price pressures remained elevated even before the conflict began.
Market Reaction & Analyst Views
Beyond gold, silver added 0.7%, with platinum and palladium also posting gains. The Bloomberg Dollar Spot Index slipped 0.1%.
Voices from the Floor:
"This is a band-aid on a bullet wound," said **Rebecca Shaw**, a veteran commodities trader at Hephaestus Funds in New York, her tone sharp with skepticism. "Draining strategic reserves might smooth a few price curves for a week, but it does nothing to address the structural risk now embedded in the Gulf. It signals desperation, not control, and that's why gold is sniffing out the long-term instability."
Offering a calmer perspective, **David Chen**, a portfolio manager at Singapore-based Global Sovereign Wealth Advisors, noted: "The coordinated action, if executed, would be a significant buffer. It gives central banks slightly more breathing room on inflation, potentially preventing a more aggressive hawkish pivot. For asset allocators, gold's resilience here confirms its strategic insurance value in a diversified portfolio."
**Arjun Mehta**, an independent geopolitical risk consultant based in Dubai, added: "The market is parsing two narratives: the immediate logistical shock from the Hormuz closure and the longer-term prospect of a widened regional war. The oil release addresses the first; gold is pricing in the potential of the second."
Finally, **Sarah Jensen**, a fixed-income analyst at a European pension fund, expressed broader concern: "My worry is this becomes 2022 redux. We used the reserves tool then for a European war, and now we're potentially tapping it for a Middle East war. The toolbox is looking emptier, and that scarcity of solutions is inherently bullish for real assets."
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