Gold prices rose in Tuesday's trading session thanks to the weakening USD and cooling energy costs after US President Donald Trump said the conflict in the Middle East could end soon.
Reducing the risk of inflation caused by war may reduce the ability of central banks to raise interest rates. This is a positive factor for gold, as this precious metal does not yield yields.
Spot gold prices rose 0.7% to 5.186. 00 USD/ounce in this afternoon's trading session. Meanwhile, US gold futures for April delivery rose 1.6% to 5,184 USD/ounce.
The USD index fell 0.4%, making gold valued in greenbacks cheaper for investors holding other currencies.
Mr. Kelvin Wong - senior market analyst at OANDA - said that gold prices increased mainly thanks to information from President Donald Trump himself when he mentioned the possibility that tensions could cool down. According to him, if oil prices fall sharply, inflation expectations may also fall accordingly. Oil prices have fallen more than 5% after Mr. Trump's statements.
However, the US President also warned that Washington's attacks could increase sharply if Iran tries to stop oil tankers from passing through the Strait of Hormuz, a shipping route that accounts for about one-fifth of global oil supplies.
The conflict has now caused the Hormuz Strait to be almost disrupted, many oil tankers have been stranded for more than a week and forced producers to temporarily stop exploitation when storage is full, pushing energy prices up sharply.
Previously, gold prices fell by 2% on Monday as rising energy costs raised concerns about inflation and made the prospect of the US Federal Reserve (Fed) early interest rate cuts more bleak.
Investors currently expect the Fed to keep interest rates unchanged after a two-day policy meeting ending on March 18, according to CME Group's FedWatch tool.
The market is also awaiting data on the US consumer price index (CPI) in February, expected to be released on Wednesday, along with the Personal Consumption Expenditures (PCE) index released on Friday. This is the Fed's preferred inflation measure.
On other precious metals markets, spot silver prices rose 2% to $88.73/ounce. Platinum rose 0.7% to $2,196.35/ounce, while palladium fell 0.3% to $1,685.01/ounce.
