Gold Edges Lower as Traders Weigh Reduced Rate-Cut Prospects

(Bloomberg) — Gold slipped after the release of monthly US inflation data dimmed prospects for the Federal Reserve to lower interest rates as the war in the Middle East drags on.

Bullion was near $5,160 an ounce in early trading, having lost 0.3% in the previous session. While core US inflation was tame at the start of the year, before the conflict began, forward-looking inflationary concerns have reduced the likelihood for the Fed to trim borrowing costs. The European Union, meanwhile, warned that its inflation could surpass 3% this year.

Now entering its 13th day, the US-Israeli war with Iran continues to disrupt oil production and refining across the Middle East. Crude rose for a second day as concerns over a prolonged conflict outweighed the biggest-ever emergency release of reserves by wealthy nations. President Donald Trump also indicated he would tap the US Strategic Petroleum Reserve to help ease prices.

As well as enduring the prospect of higher borrowing costs — a headwind for bullion, which doesn’t pay interest — gold is a source of liquidity used by investors to shore up other parts of their portfolios when needed. Since war broke out, the volume of gold held by exchange-traded funds has declined — though inflows were recorded on Tuesday after holdings fell last week by the most in more than two years.

Gold has still advanced around a fifth this year, gaining some support from its role as a haven in times of geopolitical upheaval, although trading has been choppy and upward momentum has stalled since the war began on Feb. 28.

Spot gold fell 0.3% to $5,160.82 an ounce as of 6:39 a.m. in Singapore. Silver slid 0.8% to $85.09. Platinum and palladium traded lower. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1% after ending the previous session up 0.2%.

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