CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
Gold prices rallied on Monday as the dollar’s retreat burnished bullion’s safe-haven appeal after a surprise output cut by OPEC+ rekindled fears of prolonged inflation and triggered uncertainty about the central bank’s response.
Spot gold rose 0.8% to $1,985.37 per ounce by 12:30 p.m. Eastern Time, extending its gains from last week. US gold futures crossed the $2,000 level, up 1.0% to $2,007.40 per ounce in New York.
[Click here for an interactive chart of gold prices]
“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 stressed in a Reuters note.
While bullion has struggled to gain from its traditional status as a hedge against inflation due to high interest rates, the surprise oil supply cut on Monday also drove a sharp retreat in the dollar, in which bullion is priced.
Also burnishing gold’s appeal, US 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, the precious metal brushed against a four-session low of $1,949.80.
However, that seemed to be a “knee jerk reaction” to the dollar’s initial rise, StoneX analyst Rhona O’Connell told Reuters. 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.
(With files from Reuters)
