By Anjana Anil
(Reuters) – Gold prices gained on Friday as fears of escalating conflict in the Middle East lifted the appeal of the safe-haven metal despite stronger than expected U.S. inflation data boosting the dollar and Treasury yields.
Spot gold was up 1% at $2,048.20 an ounce at 1254 GMT, extending its run above the $2,000 level to nearly a month. U.S. gold futures were up 1.7% at $2,053.50.
“Gold is rising on the back of the ongoing geopolitical conflict in the Middle East … In spite of the stronger than expected CPI print, gold prices have recovered today and have moved up and are likely to move up further,” said Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai.
A sudden widening of the war in Gaza is raising questions about how long stock markets can rally and when central banks will cut interest rates.
The United States and Britain launched strikes against sites linked to the Houthi movement in Yemen and Saudi Arabia called for restraint in light of the strikes.
Markets now await U.S. producer prices data, due at 1330 GMT, after data on Thursday showed U.S. consumer prices rose more than expected in December. Excluding volatile food and energy costs, however, the pace of price increases fell to 3.9% from 4% on an annual basis.
U.S. Federal Reserve officials signalled inadequate progress on inflation to start cutting rates in March. Traders, however, still see a 71.4% probability of a March cut, according to the CME Fedwatch tool.
Higher rates dim the appeal of non-yielding bullion.
“Market participants continue to expect a soft landing of the U.S. economy, allowing the Fed to cut rates over coming months,” said UBS analyst Giovanni Staunovo, adding that this should support gold prices.
Spot silver rose 1.2% to $23.03 an ounce, platinum gained 0.9% to $922.85 and palladium climbed 0.2% to $985.99.
(Reporting by Anjana Anil in Bengaluru; Editing by Mark Potter and David Goodman)
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