Spot Gold dented by firm USD, higher bond yields

Spot Gold held mostly below the $5,200/oz. mark on Thursday, as a surge in oil prices drove up inflation expectations and also underpinned Treasury yields and the US Dollar.

Higher bond yields tend to increase the opportunity cost of holding Gold, which pays no interest.

The US Dollar Index held near a more than three-month high of 99.695. A firmer dollar makes dollar-priced Gold less appealing to international investors holding other currencies.

Oil prices soared markedly, briefly moving above the $100 per barrel threshold, following reports that two international oil tankers had been hit near Iraq.

Iran’s Islamic Revolutionary Guard Corps said that it launched a joint operation with Lebanon’s Hezbollah targeting locations in Israel, Jordan and Saudi Arabia.

Also, Bahrain’s Interior Ministry reported on Thursday that Iran had targeted fuel tanks at a facility in Muharraq Governorate, one of Bahrain’s four administrative regions.

Despite that the International Energy Agency has agreed to the largest-ever coordinated release of 400 million barrels of oil, market participants are treating the emergency measure as insufficient in the face of escalating geopolitical risks.

Rising energy prices are increasing inflationary risks and could complicate the Federal Reserve’s policy outlook, adding to expectations that the central bank may delay rate cuts.

Data released on Wednesday showed that the February US Consumer Price Index had risen 0.3% month-over-month and 2.4% year-over-year, broadly matching market expectations. However, analysts point out that the latest CPI report does not yet fully capture the recent surge in oil prices stemming from geopolitical developments.

Market players are now awaiting the US PCE inflation data for more clues on the Federal Reserve’s monetary policy trajectory.

Spot Gold was last up 0.12% on the day to trade at $5,182.69 per troy ounce.