Gold prices remained largely stable on Thursday after recovering from an earlier decline of nearly 1%, as investors bought the dip despite pressure from a stronger US dollar and reduced expectations for near-term interest rate cuts due to rising oil prices.
Spot gold slipped 0.1% to $5,172.86 per ounce as of 0221 GMT. Meanwhile, US gold futures for April delivery were unchanged at $5,178.
“Given a lack of a short-term exit for the Middle East conflict right now, plus a de facto closure of the Strait of Hormuz, I think any gold dips will likely be bid (buying opportunity), since the market lacks a clear reason to sell the metal,” said Nicholas Frappell, global head of institutional markets at ABC Refinery.
The US dollar strengthened by 0.1%, making gold priced in dollars more expensive for buyers using other currencies.
Iran warned that global oil prices could surge to $200 per barrel after its forces targeted merchant vessels on Wednesday. At the same time, the International Energy Agency called for a large-scale release of strategic oil reserves to ease what could become one of the most severe oil shocks since the 1970s.
Oil prices rose during early trading, adding to inflation concerns as supplies from the Gulf remain tight amid the ongoing US-Israeli conflict with Iran.
According to sources, Iran has deployed roughly a dozen naval mines in the Strait of Hormuz, a development that could further complicate efforts to reopen the critical shipping route used for global oil and liquefied natural gas exports.
Several tankers have been stranded in the strait for more than a week, while some producers have halted output as storage facilities approach capacity.
Economic data showed that the US consumer price index increased by 0.3% in February, matching market forecasts and accelerating from a 0.2% rise recorded in January.
On a yearly basis, CPI climbed 2.4% in February, also in line with expectations.
Investors are now awaiting the delayed release of January’s Personal Consumption Expenditures index scheduled for Friday.
Among other precious metals, spot silver declined 0.3% to $85.49 per ounce. Platinum edged up 0.1% to $2,171.19, while palladium gained 0.8% to reach $1,650.52.
