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Markets see 58% chance of quarter-point Fed hike in May
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Dollar 0.3% lower
(Updates prices)
By Deep Kaushik Vakil
April 3 (Reuters) - Gold rallied 1% on Monday as the
dollar's retreat burnished bullion's appeal as a safe-haven
after a surprise output cut by OPEC+ rekindled fears of
prolonged inflation and triggered uncertainty about the central
bank response.
Spot gold gained 0.9% at $1,984.75 per ounce by
1:45 p.m. EDT (1745 GMT). U.S. gold futures settled 0.7%
higher at $2,000.40.
"We're getting hit consistently by big major events here and
that is keeping investors nervous," said Edward Moya, senior
market analyst at OANDA, referring to the global banking turmoil
that pushed gold nearly 8% higher last month.
The shock decision by OPEC+ is "really driving that inflation
hedge trade for gold", Moya added.
While gold has struggled to gain from its traditional status
as a hedge against inflation since higher interest rates to
combat the rising prices also dim appeal for zero-yield bullion,
the surprise cut on Monday also drove a sharp retreat in the
dollar, in which bullion is priced. Also burnishing gold's appeal, U.S. manufacturing activity
slumped to the lowest level in nearly three years in March amid
tightening credit conditions, extending losses for benchmark
10-year Treasury yields. Earlier in the session, gold brushed against a four-session
low of $1,949.55. That seemed to be a "knee jerk reaction" to the dollar's
initial rise, said StoneX analyst Rhona O'Connell.
Bullion reversed course later on, mirroring a flip in the
dollar.
However, analysts said higher interest rates could still
prove a headwind for gold later on.
"Gold is now vulnerable to a move down to $1,900, given the
potential for a higher terminal Fed rate that markets are
currently pricing in," said Matt Simpson, senior market analyst
at City Index.
Silver fell 0.7% to $23.91 per ounce, platinum was down 0.5% at $986.07, while palladium was
mostly flat at $1,460.52.
(Reporting by Deep Vakil in Bengaluru; Editing by Josie Kao and
Shilpi Majumdar)
