Gold climbs over 2% on softer dollar, easing fears of higher interest rates

Synopsis

Gold prices surged over 2% as a weaker dollar and falling oil prices eased inflation concerns. Reports of a U.S. peace proposal to end the Middle East war contributed to the rally. This development, coupled with a U.S. concession from Iran, boosted investor sentiment towards the precious metal.

Gold rose more than 2% on Wednesday, buoyed by a softer dollar, while a drop in oil prices eased concerns about elevated inflation and higher global interest rates, amid reports of a U.S. plan to end the Middle East war.

FUNDAMENTALS

* Spot gold rose 2.1% to $4,568.29 per ounce as of 0100 GMT. U.S. ‌gold futures for ⁠April ⁠delivery gained 3.8% to $4,569.40.

* The dollar eased, making greenback-priced bullion cheaper for holders of other currencies.

* Oil prices fell below $100 a barrel, easing inflation concerns, on reports that the U.S. has sent Iran a 15-point plan to end the war in the Middle East.

* U.S. President Donald Trump said on Tuesday the U.S. was making progress in its efforts to ⁠negotiate an ‌end to war with Iran, including winning an important concession from Tehran, while a source confirmed that Washington had sent ⁠Iran a 15-point settlement proposal.

* Trump told reporters at the White House that Iran had made a valuable concession related to non-nuclear energy and the Strait of Hormuz, although he did not elaborate.

* Higher crude prices tend to fuel inflation by pushing up transport and manufacturing costs. Although rising inflation typically boosts gold's appeal as a hedge, high interest rates weigh on demand for the ‌non-yielding asset.

* Interest rate futures have erased any prospect for a U.S. Federal Reserve rate cut this year, according to CME Group's FedWatch tool.

* "Despite gold ⁠prices trading ~17% below pre-conflict levels amid USD strength and broad-based de-risking, this flush has historically been a tactical dip to buy, and the bullish case strengthens the longer the conflict persists," JP Morgan said in a note.

* Spot silver rose 3.8% to $73.94 per ounce. Spot platinum gained 2.6% to $1,984.05 and palladium was up 1.5% at $1,461.75.

DATA/EVENTS (GMT)

07 UK Core CPI YY Feb

0007 UK CPI YY Feb

0007 UK CPI Services MM, YY Feb

0012 US Import Prices YY Feb 30

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