Market News

(Bloomberg) -- Gold traded in a narrow range, after the release of US inflation data dimmed prospects for interest-rate cuts and the war in the Middle East pushed oil prices higher.

Bullion rose 0.1%, erasing earlier losses. While core US inflation came in tame at the start of the year, forward-looking inflationary concerns linked to conflict in the Middle East have caused traders to pare back some of their bets on Federal Reserve rate cuts this year, weighing on non-yielding gold.

Nearly two weeks into the US-Israeli war with Iran, fighting continues to disrupt oil production and refining across the Middle East. Brent crude briefly jumped back above $100 a barrel in Asian trading hours, and is almost 60% higher this year.

As well as enduring the prospect of higher borrowing costs, gold is a source of liquidity used by investors to shore up other parts of their portfolios when needed. Since war broke out, the volume of gold held by exchange-traded funds has declined — with holdings last week falling by the most in more than two years.

“I think what you’re going to see is more demand for gold coming out of this,” Carlyle Group Inc.’s Jeff Currie said on Bloomberg Television.

When oil prices spiked in the past, the resulting windfall of petrodollars for producers would end up invested in US assets, Currie said. This time emerging market buyers are opting for gold, as they seek to avoid having their foreign exchange reserve assets frozen, as Russia’s were in 2022.

Gold has advanced nearly a fifth this year, with gains underpinned by investor demand for safe havens as geopolitical tensions rise. Still, that upward momentum has stalled since the war began on Feb. 28.

Spot gold edged higher to $5,178.86 an ounce as of 11:26 a.m. in London. Silver rose 1.3% to $86.87. Platinum and palladium also gained. The Bloomberg Dollar Spot Index advanced 0.1%, a similar magnitude of gain to Wednesday’s advance.