Gold prices climbed to their highest level in nearly a month following Iran's decision to reopen the Strait of Hormuz to commercial shipping, easing investor fears of an extended Middle East conflict and its inflationary impact. On Friday afternoon in London, gold was fixed at $1,870.50 per ounce, up from $1,773.75 a week earlier. In Thailand, gold prices increased by 900 baht to 73,100 baht per baht-weight (15.2 grams) over the same period.

Since the onset of the war in the Middle East more than six weeks ago, gold has regained over half of its earlier losses. Despite its reputation as a safe-haven asset, gold initially declined by nearly 10% due to market expectations of higher interest rates prompted by rising energy costs and a stronger U.S. dollar. Metals strategist Nicky Shiels of MKS PAMP noted that gold has moved inversely to oil and the dollar while tracking positively with risk assets since the conflict began. She highlighted that any news pointing to de-escalation tends to boost gold prices.

Demand dynamics varied in key markets. In India, retail buying was subdued ahead of the Akshaya Tritiya festival, a traditional period of increased gold purchases, as elevated local prices weighed on consumers. Additionally, import-related disruptions emerged when Indian banks temporarily halted gold and silver import orders, with significant volumes held up at customs due to a delayed government import authorization that was only finalized late Friday. Normally, a halt in imports from banks would push premiums sharply higher, but weak demand and redemptions from exchange-traded funds kept premiums from rising substantially, according to a Mumbai market dealer.

In China, the world’s largest gold consumer, premiums for physical bullion remained stable at $3 to $6 per ounce above global benchmark pricing. Bernard Sin, Greater China director at MKS PAMP, pointed out that support for gold in the region primarily stems from central bank purchases, although additions to reserves often slow during the second quarter, which may limit further upward pressure on prices.

Overall, the reopening of the Strait of Hormuz has injected new momentum into gold markets by reducing uncertainties tied to the Middle East conflict and its wider economic effects.