Gold gains nearly 2pct on softer dollar, cooling inflation concerns

NEW YORK: Gold rose nearly two per cent on Tuesday, buoyed by a softer dollar and easing inflation concerns as oil prices pulled back amid indications the conflict in the Middle East could end soon.

Spot gold was up 1.9 per cent at US$5,231.79 per ounce as of 1:31 p.m. ET (1731 GMT). US gold futures for April delivery settled 2.7 per cent higher at US$5,242.10.

The dollar index slipped, supporting gold prices as a weaker dollar makes greenback-priced bullion more affordable for other currency holders.

Oil prices plummeted on Tuesday after soaring to a more than three-year high in the previous session as US President Donald Trump predicted the war in the Middle East could end soon, easing concerns about prolonged disruptions to oil supplies.

On the ground, however, there were no signs of the war easing, with Tehran residents reached by Reuters describing US-Israeli bombardment of the capital overnight as the fiercest of the conflict.

"With oil prices easing from peaks above US$100 - still inflationary and therefore supportive for gold, but no longer high enough to seriously limit the Fed's ability to cut rates - investors are gaining comfort that the debasement trade may be re-energising as we move on," said Bart Melek, global head of commodity strategy at TD Securities.

Despite being viewed as an inflation hedge, gold loses some appeal when interest rates rise, as it offers no yield.

Investors also await US consumer price index data and Personal Consumption Expenditures data due later this week. The Federal Reserve is expected to hold rates steady at its upcoming March 17-18 meeting.

Meanwhile, gold in Dubai is trading at a discount to London as flight constraints caused by the conflict keep more bullion in the local market, while demand remains subdued.

Spot silver rose 2.7 per cent to US$89.39. Spot platinum gained 2.2 per cent at US$2,229.15, while palladium fell 0.9 per cent to US$1,675.50.