Key points:
- Bullion hit all-time high of $2,365.09 per ounce on Tuesday
- Markets are now adjusting to the high-for-longer rate scenario – analyst
- Silver hit its highest levels since June 2021 on Wednesday
Gold prices climbed on Thursday, recouping losses from the previous session, as geopolitical tensions bolstered demand for the safe-haven metal.
Spot gold was up 0.6% at $2,345.56 per ounce, as of 0317 GMT. Bullion hit a record high for an eighth consecutive session until Tuesday. U.S. gold futures also gained 0.6% to $2,362.80.
“Higher-than-expected consumer prices for the third straight month this year continues to test the Fed’s inflation tolerance,” said IG market strategist Yeap Jun Rong.
Data overnight showed U.S. inflation in March once again came in hotter than expected, decimating the chance of a rate cut in June. Core CPI advanced 0.4%, above forecasts of a 0.3% rise.
“Markets are now adjusting to the high-for-longer rate scenario, which translates to some near-term profit-taking in gold prices overnight,” Jun Rong said, adding that the downside seems limited into the session as market participants still perceive gold as a good hedge against geopolitical tensions.
Strong central bank buying, safe-haven inflows amid continued geopolitical risks, and demand from momentum-following funds have fueled bullion’s 14% gain so far this year.
Fed officials worried last month that progress on inflation might have stalled, making a longer period of tight monetary policy necessary, according to the minutes of the U.S. central bank’s March 19-20 meeting.
Along with the recent hot inflation data, a strong U.S. jobs report last week that blew past forecasts also stirred more questions on the feasibility of rate cuts this year.
Higher interest rates reduce the appeal of holding non-yielding gold.
Spot silver edged 0.2% higher to $28.03 per ounce, after hitting its highest levels since June 2021 on Wednesday.
Platinum rose 1% to $968.90 and palladium gained 0.3% to $1,054.10.
### Geopolitical Factors Boost Gold Prices
Geopolitical tensions continue to play a significant role in boosting the demand for gold as a safe-haven asset. The current global uncertainties have led investors to seek refuge in gold, driving prices higher.
### Impact of Inflation Data on Gold Prices
The higher-than-expected consumer prices and U.S. inflation data have put pressure on the Federal Reserve to maintain a tighter monetary policy. This has implications for gold prices as investors navigate the uncertainty surrounding inflation and interest rates.
### Central Bank Buying and Market Perception
The combination of strong central bank buying, safe-haven inflows, and market participants viewing gold as a hedge against geopolitical risks have contributed to the upward momentum in bullion prices. This aligns with the broader narrative of gold being seen as a reliable asset during times of economic and political uncertainty.
### Potential Rate Cuts and Gold Market Dynamics
The recent U.S. jobs report and concerns about inflation have raised questions about the possibility of rate cuts this year. Higher interest rates could diminish the appeal of non-yielding assets like gold, emphasizing the importance of monitoring economic indicators for gold market dynamics.
### Outlook for Other Precious Metals
In addition to gold, other precious metals like silver, platinum, and palladium have also experienced movements in response to market factors. Understanding the interconnected nature of these metals can provide insights into broader market trends and investor sentiment.
