Bullion edged up 0.1 percent, recovering earlier losses after the latest U.S. inflation data reduced expectations for aggressive rate cuts by the Federal Reserve, News.Az reports, citing Bloomberg.
Although core inflation showed signs of easing, concerns that the Middle East conflict could push prices higher have led traders to scale back some bets on rate reductions this year, putting pressure on non-yielding assets such as gold.
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Nearly two weeks into the U.S.-Israeli war with Iran, fighting continues to disrupt oil production and refining across the Middle East. Brent crude briefly climbed above $100 per barrel during Asian trading hours and has risen almost 60 percent since the start of the year.
Gold is also often used as a source of liquidity by investors seeking to support other parts of their portfolios. Since the war began, holdings of the metal in exchange-traded funds have declined, with volumes falling last week by the largest amount in more than two years.
Despite the recent decline in ETF holdings, some analysts expect demand to strengthen. Carlyle Group strategist Jeff Currie told Bloomberg Television that rising oil revenues could lead emerging-market buyers to increase gold purchases.
He noted that during previous oil price spikes, surplus petrodollars were often invested in U.S. assets. This time, however, some emerging economies are turning to gold as a reserve asset to avoid the risk of foreign exchange reserves being frozen, as happened to Russia in 2022.
