Gold prices edged up on Wednesday thanks to safe-haven demand, while falling oil prices eased concerns about inflation, thereby restoring expectations that the US Federal Reserve (Fed) could cut interest rates this year. Investors are also waiting for US consumer price index (CPI) data to have more signals about monetary policy.
Spot gold prices fell 0.1% to $5,198.29/ounce in this afternoon's trading session. Meanwhile, US gold futures for April delivery fell 0.7% to $5,206.40/ounce.
Oil prices fell below 90 USD/barrel after information emerged that the International Energy Agency (IEA) proposed the largest oil inventory release in history to curb the sharp increase in energy prices.
Mr. Nikos Kavalis - Singapore Regional Managing Director of Metals Focus - said that as concerns about inflation subside, the risk hedging and safe-haven role of gold is being paid attention to again. According to him, from current prices, the outlook for gold is still quite positive.
The US and Israel have launched the most intense airstrikes since the outbreak of fighting against Iran, according to assessments by the Pentagon and sources at the scene, although the global market believes that President Donald Trump may seek to end the conflict soon.
The war has paralyzed the Strait of Hormuz, the route that transports about one-fifth of global oil and liquefied natural gas, for almost a week. A series of oil tankers have been stranded for more than a week, while many producers have been forced to stop exploitation due to full storage, causing energy prices to skyrocket.
Gold, which is considered a safe haven asset, has increased by more than 20% since the beginning of the year and continuously set new records amid increasing geopolitical and economic instability.
Mr. Kavalis believes that the possibility of gold prices exceeding the 6,000 USD/ounce mark in the third or fourth quarter of this year is very high and may even increase even more strongly at the beginning of next year.
The market is awaiting data on the US consumer price index in February, expected to be released later in the day, along with the Personal Consumption Expenditures (PCE) index - the Fed's preferred inflation measure - which will be released on Friday.
According to CME Group's FedWatch tool, investors expect the Fed to keep interest rates unchanged after the two-day meeting ending on March 18, but still forecast that there will be at least two interest rate cuts this year.
On other precious metals markets, spot silver prices fell 0.8% to $87.74/ounce. Platinum prices fell 0.6% to $2,188.27/ounce, while palladium rose 0.5% to $1,663.39/ounce.
