Gold rises from one month low as dollar momentum pauses
Spot gold rose to $4,856.82 as a weaker dollar provided support after a recent slump. Gains are limited by a hawkish Fed and rising energy costs from Iran.
Gold prices edged higher on Thursday, recovering from a one-month low as the dollar's momentum stalled. However, the metal's gains were capped by a hawkish stance from the United States Federal Reserve, which has tempered expectations for near-term interest rate cuts.
Spot gold rose 0.8% to $4,856.82 per ounce, following a sharp 3.7% decline on Wednesday. The slight rebound comes as the greenback eased, making dollar-priced bullion more affordable for international buyers. Despite this, the broader trend for gold remains pressured by rising energy costs and shifting monetary policy expectations.
"The dollars momentum has paused today, which has effectively allowed gold to start recouping ground, albeit at a modest pace," said Tim Waterer, KCM Trade chief market analyst.
Geopolitical tensions in the Middle East have significantly impacted the energy sector, with Brent Crude Oil climbing above $110 a barrel. This surge followed reports that Iran attacked several energy facilities in the region after a strike on its South Pars gas field. The potential closure of the Strait of Hormuz has kept crude prices elevated, increasing global transport and manufacturing costs and adding to inflationary pressures.
Central banks have responded to these inflationary risks with a firm tone. Both the U.S. Federal Reserve and the central bank of Canada maintained steady interest rates on Wednesday but warned that surging energy costs could lead to a more persistent inflation spike. This hawkish outlook has influenced major currency pairs, including USD/CAD, as markets adjust to the possibility of prolonged high rates.
Gold's appeal as a safe-haven asset has been tested recently, with prices falling more than 9% since a joint strike involving Israel against Iranian targets on February 28. During this period, the dollar has emerged as a preferred destination for safe-haven flows. Additionally, the U.S. administration under Donald Trump is reportedly considering the deployment of thousands of troops to reinforce operations in the Middle East, further complicating the geopolitical landscape.
In other precious metals markets, Silver gained 1.5% to reach $76.52 per ounce. Platinum rose 0.6% to $2,035.25, while Palladium added 1.2% to trade at $1,492.25.
