Bengaluru — Gold prices rose on Tuesday, supported by a weaker dollar and easing energy costs after US President Donald Trump suggested that the war in the Middle East could end soon.
Respite from a potential war-driven surge in inflation would probably reduce the chances of central banks raising interest rates, a positive for nonyielding gold.
Spot gold rose 0.5% to $5,161.54/oz by 4.29am GMT. US 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 US 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 US 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 more than 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 US 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 US 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/oz. Spot platinum fell 0.2% to $2,177.02 and palladium lost 0.9% to $1,675.58.
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