Gold prices held steady on Tuesday as investors took a cautious stance, opting to wait for further developments amid rising tensions in the Middle East, particularly after reports indicated that U.S. President Donald Trump views his conflict with Iran as “very complete”. Spot gold fell by 0.1% to $5,131.24 per ounce, as of 0051. Gold futures in the U.S. for April delivery rose by 0.7% to $5,141.40. The dollar fell by 0.4%, making dollar-denominated bullion cheaper for those holding other currencies.
Trump on Monday predicted a quick end to the conflict, ahead of the initial four-week timeline he had set, even as Iran’s hardliners rallied in support of the new Supreme Leader, Mojtaba Khamenei, showing a strong determination to maintain their position for the foreseeable future. The ongoing conflict has effectively closed the Strait of Hormuz, a critical chokepoint responsible for a significant portion of global oil and liquefied natural gas shipments. The ongoing disruption has caused tankers to be stranded for over a week, forcing producers to halt production as storage capacities hit their limits, leading to a significant rise in energy prices.
Rising energy prices have heightened concerns about inflation and decreased the chances of a near-term cut in interest rates by the U.S. Federal Reserve. Investors expect that the Federal Reserve will keep its current interest rates after the end of its two-day meeting on March 18, based on the CME Group’s FedWatch tool. The likelihood of a June hold, which was below 43% last week at the start of the conflict, has now risen to more than 63%. Gold is viewed as a protection against inflation; nonetheless, low interest rates increase its appeal as an asset that does not generate returns.
Markets are currently looking forward to the release of the U.S. consumer price index for February, set for Wednesday, along with the Personal Consumption Expenditures index – the Federal Reserve’s preferred measure of inflation – on Friday. Spot silver rose by 0.4% to $87.32 per ounce. Spot platinum fell by 0.6% to $2,168.52, and palladium experienced a minor drop of 0.1% to $1,689.11.