Gold steady as conflict-driven inflation fears counter dollar softness
US gold futures for April delivery fell 0.6% to $5,031.50.
Highlights:
- Fed policy meeting due this week
- Still very bullish on gold, analyst says
- Platinum gains over 3%
Gold prices were little changed today (16 March), as concerns that inflation stemming from the Middle East conflict could keep interest rates higher for longer outweighed support from a softer dollar and safe-haven demand.
Spot gold held steady at $5,025.16 per ounce, by 09:22am ET (1322 GMT), after hitting its lowest level since 19 February earlier in the session.
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US gold futures for April delivery fell 0.6% to $5,031.50.
The dollar pulled back from a 10-month peak, making dollar-priced bullion more attractive to holders of other currencies.
"With higher oil prices comes higher inflation. If we do have higher inflation, central banks are not going to be as motivated as they were six months ago to cut rates, which is a negative for gold prices," said Bob Haberkorn, senior market strategist at RJO Futures.
"But I'm still very bullish on gold, given what's happening around the world. A lot of money is still on the sidelines waiting to enter this market, and I'm still anticipating $6,000/oz gold."
Gold, typically an inflation and uncertainty hedge, tends to underperform in high-rate environments because the opportunity cost of holding a non-yielding asset rises.
Oil prices fell on Monday amid attacks on Gulf oil production and US President Donald Trump's call for global efforts to secure the Strait of Hormuz. Japan and Australia said they were not planning to send navy vessels to escort ships through the vital waterway.
Also, on the market's radar this week are the US Producer Price Index (PPI) data, the Federal Reserve's policy decision, Chair Jerome Powell's speech, and weekly US jobless claims numbers.
The Fed is expected to hold rates steady at its meeting on Tuesday and Wednesday. Data since the last meeting showed little change in the underlying outlook, and the Fed is transitioning to a new leader, Kevin Warsh, nominated by Trump.
Elsewhere, spot silver was flat at $80.52. Spot platinum gained 3.6% at $2,096.75 and palladium rose 2.5% to $1,589.40.
