Gold edges up as lower oil prices pare rate-hike expectations

Gold prices increased slightly, reaching US$4,206.86 per ounce, after a decline in oil prices reduced inflation worries and hinted at the possibility of the US Federal Reserve postponing further interest rate hikes. In the previous week, bullion had risen 1.3% to trade above US$4,200 an ounce. Brent crude oil prices dropped to around US$103 a barrel due to concerns about possible easing of supply and cost issues following a claim by US President Donald Trump that Russia and Ukraine had reached an "energy ceasefire."

The holiday for US debt markets on Monday also helped gold, as yields on 30-year US Treasury bonds fell last Friday. Strategist Christopher Wong from Oversea-Chinese Banking Corp. noted that softer inflation, especially if accompanied by further declines in long-end yields and the US dollar, could propel gold's recovery. Investment demand has also bolstered gold's price in recent days, with gold-backed exchange-traded funds adding holdings and the People's Bank of China accelerating its buying.

However, gold has still fallen by a fifth since the US-Iran war began in late February. Energy supply disruptions in the Middle East have kept inflation risks high, leading to some central banks tightening monetary policy, which has been unfavorable for the non-yielding precious metal. The market is eagerly awaiting inflation data on Wednesday for further clarity.

The planned appearance of Fed chairman Kevin Warsh on Thursday at an International Monetary Fund discussion and speeches from other influential Fed officials could provide insights into the central bank's outlook. Platinum and palladium also experienced an advance. As of 11.49 am, spot gold was at US$4,206.86, while silver rose 0.5% to US$61.12. The Bloomberg Dollar Spot Index fell by 0.1%.