Gold steady as softer dollar offsets fading Fed rate-cut hopes
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Gold steadied near $4,488 as a softer dollar offset surging energy prices and inflation fears; higher rates limit demand, while silver, platinum, and palladium saw gains.
(Reuters) - Gold prices held steady on a volatile Monday session, with a softer dollar meeting a surge in energy prices that fuelled inflation worries and further dimmed expectations for U.S. Federal Reserve interest rate cuts this year.
Spot gold edged lower 0.1% to $4,488.46 per ounce as of 0431 GMT after having swung between a more than 1% fall and a marginal gain earlier. U.S. gold futures for April delivery lost 0.1% to $4,518.30.
The U.S. dollar eased, making dollar-denominated commodities more affordable for holders of other currencies.
"Gold's price action last week (when it snapped a three-week losing streak) suggested a reaction to oversold behaviour, and a possible reversal of recent declines. However, this needs to be confirmed by price action this week. Given the rapid flow of headline news, it's easiest to expect volatility," said Nicholas Frappell, global head of institutional markets at ABC Refinery.
Brent crude rallied above $115 a barrel after Yemeni Houthis launched attacks on Israel over the weekend, widening the ongoing war and adding to inflation woes. The contract is up 60% so far in March, a record monthly rise.
U.S. President Donald Trump said the U.S. and Iran have been meeting "directly and indirectly" and that Iran's new leaders have been "very reasonable", as more U.S. troops arrived in the region and Tehran warned it will not accept humiliation.
Traders see little chance of a U.S. rate cut this year, as higher energy prices threaten to feed into broader inflation and limit scope for monetary easing. That compares with expectations for two rate cuts before the conflict began.
While inflation typically boosts gold's appeal as a hedge, elevated interest rates weigh on the non-yielding metal's demand.
Gold has fallen more than 15% so far this month, marking its steepest monthly decline since October 2008, pressured by the U.S. dollar, which has gained more than 2% since the U.S.-Israeli war on Iran began on February 28.
After supply chain worries during the pandemic, a spike in energy costs triggered by Russia's invasion of Ukraine, and confusion over US tariffs, industrials were recovering at the start of this year.
"The bigger macro picture behind that underperformance is the huge shift in interest rate expectations... The USD has picked up on that," said Frappell.
Spot silver rose 0.5% to $69.91 per ounce. Spot platinum gained 2.7% to $1,911.05 and palladium rose 2.9% to $1,416.60.
