Gold set for weekly drop as oil price surge weighs on rate-cut hopes

Gold prices rose on Friday, supported by a weaker dollar and softer US Treasury yields, but were on track for a second consecutive weekly drop as rising energy prices dimmed prospects for near-term US interest rate cuts.

Spot gold was up 0.8% at $5,118.75 per ounce, as of 0234 GMT.

US gold futures for April delivery was unchanged at $5,123.30.

“The dollar has eased from its highs which has opened the door for gold to make headway amid the ongoing geopolitical risks,” said Tim Waterer, KCM Trade chief market analyst.

Bullion, however, has lost roughly 1% so far this week. Fears of inflation and questions about the Federal Reserve’s ability to cut rates if high oil prices persist is somewhat counteracting gold’s appeal, Waterer said.

The dollar nudged lower on Friday, making greenback-priced commodities such as bullion cheaper for holders of other currencies. The US 10-year Treasury yields eased, increasing the appeal of non-yielding bullion.

Heightening geopolitical tensions, Iran’s Supreme Leader Mojtaba Khamenei said on Thursday that Tehran will keep the strategic Strait of Hormuz closed as leverage against the United States and Israel, a development that has stoked concerns about global energy supply and risk assets.

Oil prices rose above $100 a barrel, stoking inflation fears, as attacks on oil tankers in the Gulf and warnings from Iran shattered prospects of quick de-escalation in the Middle East conflict.

As oil prices surged, US President Donald Trump again demanded Fed Chair Jerome Powell cut interest rates.

Traders expect the Fed to keep rates steady in the current 3.5%-3.75% range at the end of its two-day meeting on March 18, according to CME Group’s FedWatch tool.

While recent inflation data suggest price growth is under control, the war on Iran and the resulting spike in crude prices have yet to filter through the data.

Investors are now awaiting release of January’s delayed Personal Consumption Expenditures Index, due later in the day.

Spot silver was up 1.4% at $84.96 per ounce.

Spot platinum gained 0.9% to $2,151.97 and palladium rose 1.4% to $1,640.64.