(March 12): Gold fell for a second day, after the release of US inflation data dimmed prospects for interest-rate cuts and the war in the Middle East pushed oil prices higher.
Bullion retreated as much as 1%, having lost 0.3% in the previous session. While core US inflation came in tame at the start of the year, before the conflict began, forward-looking inflationary concerns have reduced the likelihood for the Federal Reserve to trim borrowing costs. A gauge of the dollar rose as much as 0.3%, while the European Union warned that its inflation could surpass 3% this year.
Gold’s retreat “looks more like a pause, not a surrender,” said Hebe Chen, an analyst at Vantage Markets in Melbourne. “Firming price-pressure expectations have revived the dollar and put near-term Fed easing back in the drawer, briefly crowding out bullion in a market that can only hold one safe haven at a time.”
Nearly two weeks into the US-Israeli war with Iran, fighting continues to disrupt oil production and refining across the Middle East. Brent crude jumped back above US$100 a barrel on Thursday as concerns over a prolonged conflict outweighed the biggest-ever emergency release of reserves by wealthy nations. As part of that plan, the US said it would release 172 million barrels from its emergency oil reserve.
As well as enduring the prospect of higher borrowing costs — a headwind for bullion, which doesn’t pay interest — gold is a source of liquidity used by investors to shore up other parts of their portfolios when needed. Since the war broke out, the volume of gold held by exchange-traded funds has declined — though inflows were recorded again on Tuesday after holdings fell last week by the most in more than two years.
See also: Gold steadies with traders looking to oil and dollar during war
Gold has still advanced nearly a fifth this year, gaining some support from its role as a haven in times of geopolitical upheaval, although trading has been choppy and upward momentum has stalled since the war began on Feb 28. “The safe-haven trade isn’t over. It’s just catching its breath,” said Chen.
Spot gold fell 0.5% to US$5,151.82 an ounce as of 12.10pm in Singapore. Silver slid 1% to US$84.89. Platinum fell, while palladium gained. The Bloomberg Dollar Spot Index advanced 0.2%, a similar magnitude of gain to Wednesday’s advance.
Uploaded by Evelyn Chan
