March 12 (Reuters) - Gold prices edged lower on Thursday as a stronger dollar and diminishing hopes for a reduction in borrowing costs outweighed the metal's safe-haven appeal.
Spot gold eased 0.3% at $5,159.04 per ounce by 10:08 a.m. ET (1408 GMT). U.S. gold futures for April delivery fell 0.3% at $5,165.10.
The dollar gained for a third consecutive session. The greenback is a competitive safe-haven asset, and a stronger U.S. currency makes gold more expensive for holders of other currencies.
"The higher dollar index, rising treasury yields and lack of interest-rate cuts are the negative factors, but the conflict in the Middle East has been generating some safe-haven flows," said Phillip Streible, chief market strategist at Blue Line Futures.
"If they can prevent oil prices from climbing further, gold should be in a good place... If crude starts to trend lower, you could see yields ease, the dollar give up some of its gains, and gold futures move higher."
Two tankers were ablaze in Iraqi waters in an apparent escalation in Iranian attacks that have cut off Middle East energy supplies. In reaction, oil prices rose sharply for the day.
Iran will avenge the blood of its martyrs, keep the Strait of Hormuz closed and attack U.S. bases, new Supreme Leader Ayatollah Mojtaba Khamenei said. While U.S. President Donald Trump said rising oil prices meant greater profits for the United States, his priority was to stop Iran from getting nuclear weapons.
Higher crude prices feed into inflation by raising transportation and production costs. Gold is considered an inflation hedge, but high interest rates weigh on it by making yield-bearing assets more attractive.
Elsewhere, spot silver <XAG=> rose 0.6% to $86.27 per ounce. Prices gained more than 146% last year.
Analysts at BMI said in a note they expect silver to average $93 per ounce in 2026, with strong investment demand consolidating the gains witnessed in 2025, and offsetting price-induced demand destruction in solar panels and jewellery.
Spot platinum lost 0.4% to $2,159.50, while palladium rose 0.3% to $1,642.44.
Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Ros Russell and Pooja Desai
