Precise Investors Editorial Team
Spot gold gained 0.5% to $5,161.54 per ounce
Gold prices rose on Tuesday, supported by a weaker U.S. dollar and easing energy costs.
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 gained 0.5% to $5,161.54 per ounce, as of 0429 GMT. U.S. gold futures for April delivery added 1.3% to $5,171.10.
The dollar dropped 0.3%, making dollar-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 declined 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 dropped 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. central bank.
Investors expect the central bank 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.
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