Gold prices fell on Thursday as the USD strengthened and short-term US interest rate cut expectations weakened, amid rising energy prices raising concerns about inflation.
Spot gold prices fell 0.2% to $5,179.57/ounce in this afternoon's trading session. Meanwhile, US gold futures for April delivery fell 0.1% to $5,173.10/ounce.
The USD increased by 0.2%, making gold valued at the greenback more expensive for holders of other currencies.
Mr. Nicholas Frappell, Global Markets Director at ABC Refinery, said that the strength of the USD and the story related to interest rates are creating a slight resistance for gold, although the current conflict situation should have supported the precious metal.
Iran warned the world to prepare for a scenario where oil prices could reach $200 a barrel after its forces attacked commercial ships on Wednesday. Meanwhile, the International Energy Agency (IEA) called for a large-scale strategic oil stockpile release to alleviate one of the most serious oil shocks since the 1970s.
Oil prices have risen above $100/barrel, increasing inflationary pressure as Iran intensifies attacks on oil facilities and transportation infrastructure across the Middle East.
According to sources, Iran has deployed about a dozen naval mines in the Strait of Hormuz, a move that could make efforts to reopen this narrow sea route difficult. This is an important shipping route for global oil and liquefied natural gas.
Oil tankers in the Strait of Hormuz have been stranded for more than a week, while many producers have to temporarily suspend operations due to storage nearing its maximum level.
Goldman Sachs has postponed its forecast of when the US Federal Reserve (Fed) will cut interest rates and currently expects 0.25-percent point interest rate cuts to take place in September and December, due to increased inflation risks related to the Middle East conflict.
Regarding economic data, the US consumer price index (CPI) increased by 0.3% in February, as predicted and higher than the 0.2% increase in January. Year-on-year, CPI increased by 2.4% in February, also in line with market expectations.
Investors are currently awaiting data on the Personal Consumption Expenditures (PCE) index for January – the Fed's preferred inflation measure expected to be released on Friday.
On other precious metals markets, spot silver prices rose 0.3% to $86.06/ounce. Platinum prices rose 0.3% to $2,176.14/ounce, while palladium rose 0.9% to $1,651.11/ounce.
