NEW YORK: Gold prices inched higher on Tuesday, bolstered by safe-haven demand amid geopolitical jitters stemming from the Iran war, though gains were limited as investors remained cautious ahead of the US Federal Reserve’s monetary policy decision.
Spot gold was up 0.2percent at USD5,012.80 per ounce as of 0942 GMT. US gold futures for April delivery rose 0.3percent to USD5,016.80. “Gold is finding support as demand for safe-haven assets remains elevated amid the geopolitical and economic uncertainty created by the war in Iran,” said ActivTrades analyst Ricardo Evangelista. Iran launched fresh attacks on the United Arab Emirates on Tuesday, as the war entered its third week, with at least 2,000 people dead and no end in sight.
The attack on the United Arab Emirates caused a fire in the port of Fujairah, a key export terminal where oil loading by state firm ADNOC has been halted, potentially deepening a crisis that has sent energy prices surging.
Oil rose and continued to hold above USD100 a barrel, with the Strait of Hormuz largely shut and US allies rejecting calls to deploy warships to escort tankers through the key chokepoint.
The rising energy prices have capped the upside for gold, reviving inflation fears and scaling back expectations of interest rate cuts this year, Evangelista added.
While bullion is typically seen as an inflation hedge, it tends to underperform in high-rate environments because the opportunity cost of holding a non-yielding asset rises.
Meanwhile, the US Federal Reserve is widely expected to hold rates steady for a second straight meeting when it announces its policy statement on Wednesday.
Markets are also looking out for policy decisions from the European Central Bank, the Bank of England and the Bank of Japan, which will hold their first meetings after the conflict began on February 28. Spot silver rose 0.2percent to USD80.92 per ounce, spot platinum gained 1.3percent to USD2,141.55, and palladium rose 1.6percent to USD1,623.21.
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