Market News

(Bloomberg) -- Gold declined to the lowest in a month, as investors weighed the Federal Reserve’s path for interest-rate cuts against inflationary risks from the war in the Middle East.

Bullion — which traded in a narrow range in recent days — slipped below $5,000 an ounce. While the Fed is expected to keep rates unchanged at its policy meeting later Wednesday, investors will scrutinize the US central bank’s views on rising energy prices and a softer labor market. Oil hovered above $100 a barrel, reversing earlier losses.

Iranian attacks on Israel and Arab states in the Persian Gulf continued overnight and into Wednesday, while President Donald Trump said the US could end the war with the Islamic Republic “in the near future.” Tehran vowed to avenge the killing of its security chief, Ali Larijani, while shipping through the Strait of Hormuz Hormuz remained at a near-halt.

The energy-supply crunch and higher crude prices have raised concerns over inflation and reduced the prospect for near-term rate cuts by the Fed and other central banks. Higher borrowing costs are typically a headwind for precious metals, which don’t pay interest.

While gold’s upward momentum has stalled in recent weeks, the metal has still gained about 15% this year, aided by geopolitical risks and as threats to the Fed’s independence support demand. Concerns about stagflation — a combination of slower growth and high inflation — could be supportive for bullion in the longer term as investors look for alternative stores of value.

Spot gold fell 1% to $4,956.53 an ounce by 11:10 a.m. in London, and touched the lowest since Feb. 18. Silver lost 0.4% to $78.95 an ounce. Platinum and palladium also retreated. The Bloomberg Dollar Spot Index was steady.

--With assistance from Preeti Soni.