Gold climbs on rising Middle East tensions, weaker dollar 

WASHINGTON: Gold prices climbed on Thursday as escalating tensions in the Middle East and a weakening US dollar increased demand for safe-haven assets. Softer-than-expected US inflation data also reinforced bets that the Federal Reserve could move towards interest rate cuts this year. 

Spot gold rose 0.7 per cent to $3,375.06 an ounce by 0343 GMT, while US gold futures advanced 1.5 per cent to $3,395. 

The dollar index dropped to its lowest level in nearly two months, making gold, which is priced in the greenback, more affordable for buyers using other currencies. That currency weakness, along with a technical breakout above a key resistance level, triggered fresh buying, said Kelvin Wong, senior market analyst for Asia Pacific at OANDA. 

“Breaking past the $3,346 level signalled a bullish trend and drew in more momentum-driven traders,” Wong noted. 

The rally in gold was also fuelled by geopolitical concerns. Former President Donald Trump said on Wednesday that US personnel were being relocated out of the Middle East amid rising tensions with Iran. The move has sharpened market focus on potential instability in the region, boosting demand for gold as a hedge. 

In economic data, the US consumer price index rose less than expected in May, primarily due to lower petrol prices. While inflation could still rise later in the year because of import tariffs, the latest figures supported growing expectations that the Fed may cut interest rates to support the economy. 

Wong said the data may prompt the Fed to act sooner than previously forecast, though he added the inflation readings were “not particularly alarming” at this stage. 

Traders are now pricing in at least 50 basis points of rate cuts by the end of the year. Investors will be watching for further signals from the upcoming US producer price index data, scheduled for release at 1230 GMT. 

Separately, Trump said the US and China had agreed on a framework to revive trade talks, potentially extending a fragile truce and preventing additional tariffs. He also indicated that a July 8 deadline for negotiations with other countries could be extended, though he suggested such action might not be necessary. 

In other precious metals, spot silver gained 0.4 per cent to $36.38 an ounce. Platinum advanced 1.3 per cent to $1,272.50, staying close to its highest level in over four years. Palladium, however, slipped 1 per cent to $1,068.92. 

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