Washington: Gold prices rose slightly on Monday as the dollar fell, but the gains were limited due to the sharp rise in energy prices, which exacerbated concerns about inflation, and further reduced expectations that the Federal Reserve (the US central bank) would cut interest rates this year.
By 03:30 GMT, the price of gold in spot transactions increased 0.3 percent to $4,505.86 per ounce. US gold futures for April delivery rose 0.3 percent to $4,535.80. The US dollar fell, making commodities denominated in the US currency more accessible to holders of other currencies.
“Last week’s gold price movements indicated a reaction to an oversold situation and the possibility of a reversal of the recent downtrend,” said Nicholas Vrabel, global director of institutional markets at ABC Refinery.
“However, this should be confirmed by price action this week. Given the rapid flow of major news, it is easier to expect volatility,” he added. The price of Brent crude rose to more than $115 per barrel after the Yemeni Houthis launched attacks on Israel over the weekend, which led to an expansion of the scope of the ongoing war and increased inflation problems. The contract is up 60 percent so far in March, a record monthly high.
Traders believe that the chances of lowering US interest rates this year are slim, as rising energy prices threaten to fuel inflation on a broader scale and limit the scope of monetary easing. This compares to expectations that interest rates would be cut twice before the conflict began.
While inflation usually enhances gold’s appeal as a hedge, rising interest rates put pressure on demand for the non-interest-bearing precious metal. Gold has fallen more than 14 percent so far this month, recording its largest monthly decline since October 2008, under pressure from the US dollar, which has risen more than 2 percent since the start of the US-Israeli war on Iran on February 28.
As for other precious metals, the price of silver in spot transactions rose 0.8 percent to $68.67 per ounce. The price of platinum in spot transactions increased 2.5 percent to $1,909.45, and the price of palladium increased 3.2 percent to $420.63.
(Reuters)
