Gold gains on weaker dollar, political tensions

Gold rates rose on Thursday on a weaker US dollar and as investors sought a safe-haven on fears the Middle East conflict could widen, dampening headwinds from the prospect of fewer U.S. rate cuts this year.

Spot gold was up 0.9% at $2,382.27 per ounce at 1142 GMT. It had touched an all-time high of $2,431.29 last Friday. U.S. gold futures rose 0.4% to $2,397.70.

“The weakening dollar has been supportive of precious metals across the board today. There are also other supportive factors like geopolitical risks and central bank diversification that have played a role,” said Bank of China International (BOCI) analyst Xiao Fu.

The U.S. dollar fell for a second day after a rare warning by the finance chiefs of the United States, Japan and Korea over the sharp decline in other currencies. A weaker dollar makes gold more attractive for other currency holders.

On the geopolitical front, Israel has signalled it will retaliate to a volley of attacks from Iran, but has not said how. European Union leaders have decided to step up sanctions against Iran.

“However, with rate cut expectations from the Fed being delayed and scaled down, and with the natural profit-taking that comes when prices rally quickly, we may see some pressure on gold prices as they consolidate in the current range – but not a sharp decline,” BOCI’s Fu said.

Federal Reserve officials are now being more careful about discussing the timing of rate cuts, with Chair Jerome Powell on Tuesday signaling rates may stay higher for longer.

Traders are now pricing in less than 50 basis points of rate cuts this year, while pushing back bets on the first quarter point cut to September from June or July.

Higher interest rates reduce the appeal of holding non-yielding gold.

Spot silver rose 0.8% to $28.43 per ounce, platinum was up 0.2% at $939.90 and palladium gained 0.2% to $1,027.76.