Gold gains on rising Middle East tensions

Gold prices rose on Friday as international strikes on Yemen added to fears of further escalation in the Middle East conflict, pushing up bullion’s safe-haven appeal.

Spot gold was up 0.3% at $2,033.89/oz at 4.27am GMT. However, it has fallen 0.6% so far this week.

US gold futures rose nearly 1% to $2,038.

Attention will be focused on heightened geopolitical tensions that are “one notch up in the Middle East, and is supporting gold prices above the 50-day moving average of $2,015,” said Kelvin Wong, a senior market analyst for Asia Pacific at Oanda.

The US and Britain launched strikes against sites linked to the Houthi movement in Yemen, while Saudi Arabia called for restraint in light of the strikes.

In wider financial markets, Asian shares were cautious on Friday as the escalating conflict in the Red Sea region sent oil prices surging.

Data on Thursday showed US consumer prices rose more than expected in December, but excluding volatile food and energy costs, the pace of price increases fell to 3.9% from 4% on an annual basis.

Despite hotter headline CPI, core inflation remained muted, sending 10-year Treasury yields below 4%, showing “data is not that hot, helping support gold,” Wong said.

Market bets of 150 basis points of Fed rate cuts this year were undeterred, with traders pricing in a 73% chance that they could begin as soon as March, according to IRPR, LSEG’s interest rate probability app. However, Fed officials on Thursday signalled inadequate progress on the inflation front for the central bank to start cutting rates as early as March.

The Fed is expected to hold its policy rate steady at its January 30-31 meeting.

Investors will next look out for US producer prices data, due at 1.30pm GMT on Friday.

Spot silver rose 0.4% to $22.82/oz, platinum gained 0.2% to $917.48 and palladium ticked 0.1% higher to $989.29.

Reuters