Inflation Data Dampens Cut, Gold Held Amid Iran War
Gold prices weakened after the release of US monthly inflation reduced the chances of a Federal Reserve interest rate cut, as the war in the Middle East continues to drag on. Bullion held around $5,160 per ounce in early trading after a slight decline in the previous session.
Although US core inflation was relatively benign at the start of the year—before the conflict broke out—the market is now more focused on future inflation risks. "Forward-looking" concerns are growing as energy flows and supply chains operate, making the likelihood of the Fed lowering borrowing costs increasingly slim. In Europe, the European Union has also reduced the inflation rate, which could potentially reach 3% this year.
The US-Israel vs. Iran conflict has now entered its 13th day and continues to disrupt oil production and refining activity in the Middle East. Oil prices rose for a second day as the market assessed the long-term risks of war as still more dominant than the release of the largest emergency reserves in history by developed nations. President Donald Trump also indicated that the US could use the Strategic Petroleum Reserve (SPR) to help suppress prices.
For gold, the prospect of prolonged higher interest rates poses a headwind because bullion doesn't provide disproportionate returns. At the same time, gold is often used as a source of liquidity when investors need to strengthen other parts of their portfolios. Since the outbreak of the war, gold holdings in ETFs have tended to decline, although there was an influx on Tuesday after last week's biggest decline in more than two years.
Although recent movements have been choppy and upward momentum has been muted since the war began on February 28, gold has still posted strong gains so far this year, as it is seen as a hedge against geopolitical tensions.
In the latest update in Asia, spot gold fell slightly, while silver weakened, and platinum and palladium also declined. The Bloomberg Dollar Index strengthened slightly, adding pressure on the precious metal. (asd)
Source: Newsmasker.id
