Gold prices decline as stronger US dollar and inflation concerns weigh on market

LONDON: Gold prices fell on Thursday, pressured by a strengthening US dollar and diminishing expectations for imminent US interest rate cuts, as rising energy prices heightened concerns over inflation.

As of 05:45 GMT, spot gold was down 0.4 percent at $5,153.79 per ounce. US gold futures for April delivery also dropped 0.4 percent, reaching $5,159.20 per ounce. The US dollar gained 0.2 percent, making dollar-denominated gold more expensive for investors holding other currencies.

Nicholas Frappell, global head of institutional markets at ABC Refinery, commented, “I think the USD strength and interrelated rates story is a slight headwind for gold despite the actual violence that’s taking place, which is otherwise supportive of gold.”

In the broader commodities market, geopolitical tensions contributed to volatility. Iran warned that the world should prepare for $200-a-barrel oil after its forces struck merchant ships on Wednesday. In response to the escalating situation, the International Energy Agency (IEA) called for a significant release of strategic reserves to help mitigate what it described as one of the worst oil shocks since the 1970s. Oil prices surged above $100 per barrel, further intensifying inflationary pressures as Iran increased its attacks.

The combination of a firmer US dollar, rising energy costs, and ongoing geopolitical tensions has created a challenging environment for gold, which is often seen as a safe-haven asset during periods of uncertainty. However, the prospect of higher interest rates and a stronger dollar have limited gold's appeal to investors in the short term.