Gold falls as inflation risks rise after OPEC+ oil target lowers odds of Fed hike

(Reuters) – Gold prices fell on Monday after a surprise announcement from OPEC+ on oil production cuts raised concerns about inflation and raised bets for a rate hike at the next US Federal Reserve meeting in May.

Spot gold fell 0.6% to $1,956.89 an ounce, as of 0709 GMT, the lowest in nearly a week. US gold futures fell 0.7 percent to $1,971.30.

The opportunity cost of holding non-yielding bullion increases when interest rates are increased to reduce inflation.

Gold fell “as investors weigh the allure of gold as a safe-haven asset, against the possibility of higher interest rates for a longer period. Concerns about inflation and higher interest rates have clearly won the argument,” said Matt Simpson, senior market analyst at City Index.

Oil prices jumped after Saudi Arabia and other OPEC+ oil producers announced a round of production cuts, a potentially ominous sign for global inflation just days after sluggish US price data boosted market optimism.

US consumer spending rose moderately in February and showed signs of slowing, although it remained elevated.

“Gold is now vulnerable to a drop to $1,900, given the potential for a higher final Fed rate that is currently being set by the markets,” Simpson added.

and treasury returns.

ANZ noted, in a note, “safe-haven gold demand waned as US banking turmoil subsides.”

Bullion rose nearly 8% in the latest quarter after the recent global banking turmoil prompted bets that the Federal Reserve will ease its rate hike approach.

Suki Cooper, an analyst at Standard Chartered Bank, said in a note that central banks’ buying of gold may “not be as strong as it was in 2022”.

Spot silver fell 1.6 percent to $23.69 an ounce, platinum lost 0.5 percent to $986.83, and palladium fell 0.4 percent to $1455.16.

Reporting by Kavya Guduru in Bengaluru; Editing by Janan Venkatraman and Jason Neely

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