Gold Gains on Weaker Dollar, Easing Inflation Concerns
By Praisebell Rosemond Larbi
Global gold prices climbed on Tuesday as the US dollar weakened and energy prices eased, boosting investor demand for the safe-haven metal amid signs that tensions in the Middle East could begin to de-escalate.
Spot gold rose 0.8 percent to $5,179.52 per ounce as of 0233 GMT, while US gold futures for April delivery increased by 1.7 percent to $5,188.70.
The gains were largely supported by a decline in the United States dollar, which fell 0.4 percent, making dollar-priced commodities such as gold cheaper for investors holding other currencies.
Analysts say the market reaction followed comments from Donald Trump, who suggested that the ongoing tensions in the Middle East could end soon.
According to market observers, expectations of a possible de-escalation in the conflict helped ease concerns about a prolonged surge in energy prices, which had earlier triggered fears of rising global inflation.
Kelvin Wong, Senior Market Analyst at OANDA, said the price rally was driven largely by the shifting geopolitical outlook.
“Gold prices rose due to the news flow from US President Trump himself, stating that there is a potential for de-escalation. What we could see is that potential inflation expectations start to tone down given this dramatic fall in oil prices,” he said.
Oil prices fell sharply following the remarks, dropping more than 10 percent as markets reacted to the possibility of a resolution to the conflict that had threatened to disrupt global energy supply chains.
The war in the region had raised fears of supply disruptions, particularly through the Strait of Hormuz, a crucial maritime route through which roughly one-fifth of the world’s oil supply is transported.
Tensions around the waterway had intensified in recent weeks after the conflict effectively shut the passage, leaving several oil tankers stranded and forcing some producers to halt production as storage capacity filled up.
Although the possibility of easing tensions helped calm inflation fears, the geopolitical situation remains fragile. President Trump has warned that the United States could significantly increase its attacks if Iran attempts to block tanker traffic through the strategic waterway.
Gold prices had earlier declined on Monday as surging energy prices heightened concerns about rising inflation and reduced expectations of an imminent interest rate cut by the U.S. Federal Reserve.
Higher interest rates typically reduce the attractiveness of gold because the metal does not yield interest.
However, easing inflation expectations and lower energy costs could reduce the likelihood of further monetary tightening by major central banks, which is generally supportive of gold prices.
Investors are now closely watching key US economic data releases that could influence the Federal Reserve’s next policy decisions.
Market participants are awaiting the US Consumer Price Index (CPI) for February, scheduled for release on Wednesday, as well as the Personal Consumption Expenditures (PCE) Index, the Federal Reserve’s preferred measure of inflation, expected on Friday.
Meanwhile, other precious metals also recorded gains.
Spot silver rose 3 percent to $89.60 per ounce, while platinum gained 1.2 percent to $2,208.16. Palladium also edged higher, rising 0.2 percent to $1,693.84 per ounce.
Analysts say market sentiment in the precious metals space will continue to depend heavily on developments in global geopolitics, energy markets and inflation data in the coming days.
