Gold gains on weaker dollar, easing inflation concerns
Oil prices fall after surging to $119/bbl on Monday; Trump predicts the war in the Middle East could be over soon
Gold prices rose on Tuesday, supported by a weaker U.S. dollar and easing energy costs after U.S. President Donald Trump suggested that the war in the Middle East could end soon.
Respite from a potential war-driven surge in inflation would likely reduce the chances of central banks raising interest rates, a positive for non-yielding gold.
Spot gold rose 0.5% to $5,161.54 per ounce, as of 0429 GMT. U.S. gold futures for April delivery rose 1.3% to $5,171.10.
The dollar fell 0.3%, making greenback-priced bullion cheaper for holders of other currencies.
Gold prices rose "due to the news flow from U.S. President Trump himself, stating that there is a potential for de-escalation... So what we could see is that potential inflation expectation starts to tone down given this dramatic fall in oil price," said Kelvin Wong, a senior market analyst at OANDA.
Oil prices fell by more than 10% following Trump's comments.
But, he also warned that U.S. attacks could rise sharply if Iran sought to block tanker traffic through the Strait of Hormuz, which handles one-fifth of the world's oil supply.
The war has effectively shut the strait, stranding tankers for over a week and forcing producers to halt output as storage fills up, sending energy prices soaring.
Gold prices fell by as much as 2% on Monday as higher energy costs fanned inflation concerns and further dimmed the prospects for a near-term cut in interest rates by the U.S. Federal Reserve.
Investors expect the Fed to keep rates steady at the end of its two-day meeting on March 18, per CME Group's FedWatch tool.
Gold is seen as an inflation hedge, but low rates reduce the opportunity cost of holding it as a zero-yield asset.
Markets are now awaiting the U.S. consumer price index for February, due on Wednesday, and Personal Consumption Expenditures (PCE) index - the Fed's preferred inflation gauge - on Friday.
Spot silver rose 1.4% to $88.25 per ounce. Spot platinum fell 0.2% at $2,177.02 and palladium lost 0.9% to $1,675.58.
Comments
No comments yet. Be the first to join the discussion!
