Gold prices inch higher as geopolitical tensions boost safe-haven demand

Business a.m.

Gold prices climbed on Thursday, bouncing back from a selloff the previous day.The safe-haven metal benefited from geopolitical risks and tensions, with investors seeking shelter from the turbulence. 

Spot gold rose 0.6 per cent at $2,345.56 per ounce, while  U.S. gold futures also gained 0.6 per cent to $2,362.80.

The latest data on inflation in the U.S. showed that prices continued to rise at a faster-than-expected pace in March. Core CPI, which excludes volatile food and energy prices, rose by 0.4 percent, beating forecasts for a 0.3 percent increase. 

According to IG market strategist Yeap Jun Rong, the continued rise in consumer prices is putting pressure on the Federal Reserve to take action to curb inflation. Jun Rong said that markets are now pricing in the possibility of higher interest rates for longer, leading to some profit-taking in gold prices overnight. However, he noted that the downside for gold seems limited, as investors still see it as a safe haven amid geopolitical tensions. 

Reports show that the recent rise in gold prices has been driven by a number of factors, including continued demand from central banks, safe-haven inflows during times of geopolitical tension, and momentum-following funds. However, the minutes of the Federal Reserve’s March meeting indicated that policymakers are concerned about the progress of inflation, and may be forced to maintain a tighter monetary policy stance for longer.

In addition, analysts noted that the recent strong U.S. economic data has cast doubt on the possibility of interest rate cuts this year. Higher interest rates make gold less attractive to investors, as the precious metal does not provide a yield. 

Other precious metals traded in positive territory as well, with silver reaching its highest level since June 2021, up 0.2 percent to $28.03 per ounce. Platinum rose one per cent to $968.90, and palladium saw a smaller gain of 0.3 per cent to $1,054.10.