Gold edges down as traders weigh oil and dollar markets amid war

Gold dipped Wednesday after the release of February inflation data offered no relief from mounting concerns that the war in Iran will fuel price pressures, boosting the dollar and Treasury yields at the yellow metal’s expense. Bullion held below $5,200 an ounce. The US Bureau of Labor Statistics data released Wednesday showed underlying US inflation slowed in February, before the war in Iran.

But forward-looking inflationary concerns from the war, which has boosted energy prices, proved stronger, edging the dollar up and denting the appeal of precious metals. “The market’s focus remains on the Iranian conflict and its implications on subsequent inflation reports — looking past today’s report as it is backward looking in the face of the ongoing oil shock,” said Daniel Ghali, senior commodity strategist at Toronto Dominion Bank. Treasuries also dropped, leaving traders anticipating that the Federal Reserve will cut rates only once this year.

Higher borrowing costs are a headwind for non-yielding gold. Gold has risen about 20% year-to-date, although prices haven’t made headway since the Iran war broke out late last month. Traders have been weighing US President Donald Trump’s changing rhetoric about the war.

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On Wednesday, Trump said that the US could strike even more targets in Iran “if we want,” just a day after insisting the operation would end soon. Gold’s “muted reaction” to the Iran conflict has been “largely overshadowed by a strong USD and rising yields,” analysts at BMO Capital Markets wrote in a note Wednesday. With the metal still closely tracking the inverse of the greenback, “upcoming ETF and central bank flows will be key to assessing demand from major buyers like India and China,” they said.

Gold-backed ETFs had inflows on Tuesday, after consecutive outflows since the Iran war began. Such inflows might signal that investors are getting a bit more used to a new normal and “reassessing how they’re thinking about gold,” said Helen Amos, commodities analyst at BMO Capital Markets. Spot gold was down 0.3% at $5,174.60 an ounce as of 3:24 p.m.

in New York. Silver fell 3.1% to $85.5827 an ounce. Platinum and palladium fell. The Bloomberg Dollar Spot Index edged higher.

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