Gold edged higher as sliding oil prices eased inflation concerns, giving traders some optimism the Federal Reserve could hold off on further interest-rate hikes.
Bullion traded above $4,200 an ounce, after rising 1.3% last week. Brent crude slipped to about $103 a barrel, on the potential of easing supply and cost concerns after US President Donald Trump claimed that Russia and Ukraine had agreed to an “energy ceasefire,” without providing details.
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Gold was also aided on Monday, a holiday for US debt markets, after yields on the 30-year US Treasury retreated last Friday.
The decline in long-end yields along with easing oil prices are set to provide some “cautious optimism” for gold, said Christopher Wong, a strategist from Oversea-Chinese Banking Corp. “Softer inflation, particularly if accompanied by further declines in long-end yields and the USD, could see gold extend its recovery.”
Investment demand has also added support for gold in recent days. Gold-backed exchange-traded funds added holdings last week, while the People’s Bank of China has accelerated its buying.
Still, gold has lost a fifth since the US-Iran war started in late February. Disruptions to energy supplies from the Middle East have kep inflation risks elevated and prompted some central banks to tighten monetary policy, a headwind for the non-yielding precious metal. The market is waiting for inflation data on Wednesday for more clarity.
The planned appearance by Fed chairman Kevin Warsh on Thursday in a discussion at the International Monetary Fund’s annual meeting in Bangkok could also provide insights into the central bank’s thinking. Two other closely followed Fed officials, Governor Christopher Waller and Cleveland Fed President Beth Hammack, are also speaking.
Spot gold edged 0.3% higher to $4,206.86 an ounce as of 11:49 a.m. Singapore time, while silver rose 0.5% to $61.12. Platinum and palladium advanced. The Bloomberg Dollar Spot Index declined 0.1%.
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