Gold Eases as Firm Dollar Offsets Safe-Haven Demand
Gold sees a slight decline at the start of the week, affected by a minor recovery in the U.S. dollar which reduces the demand for the metal as a safe haven amidst ongoing trade war concerns. Investors remain focused on the upcoming inflation data for hints about the Federal Reserve’s next move on interest rates.
Spot gold declined by 0.2% to $2,905.05 an ounce as of 1201 GMT, while U.S. gold futures remained steady at $2,911.60. The dollar index regained some ground after hitting its lowest point in over four months on the previous Friday. Analysts suggest that the increase in the dollar is affecting bullion prices, with expectations of a potential further decline below $2,900.
Current market focus is heavily influenced by trade tensions. Recently, in a warning to Canada, U.S. President Donald Trump hinted at possible reciprocal tariffs on dairy and lumber, adding to the uncertainty.
“Gold prices are likely to remain supported around the $2,900 level, with the possibility of revisiting the all-time maximum of $2,956 achieved in late February,” commented Ricardo Evangelista, a senior analyst at brokerage firm ActivTrades.
Traders are particularly interested in the upcoming U.S. Consumer Price Index (CPI) data expected on Wednesday, followed by the Producer Price Index (PPI) data on Thursday. These figures are pivotal in providing indicators for future U.S. interest rate decisions.
The Federal Reserve has so far maintained steady interest rates after a series of three cuts in 2024, with market trends currently indicating the likelihood of the first cut occurring in June this year.
Gold is traditionally seen as a hedge against inflation and geopolitical instability. However, rising interest rates may diminish its attraction as a non-yielding asset.
Recent data from China, the world’s leading metals consumer, shows that the consumer price index did not meet expectations for February, experiencing the sharpest drop in 13 months, alongside ongoing producer price deflation.
In other precious metals, spot silver remained unchanged at $32.55 an ounce, platinum saw a rise of 0.6% to $968.40, and palladium increased by 0.2% to $950.50.
