Gold extends gains as Middle East turmoil lifts appeal

GOLD prices climbed for a third straight session on Monday (Jan 15), as bullion held onto safe-haven gains from elevated tensions in the Middle East and after US producer prices data last week renewed bets for an early rate cut by the Federal Reserve.

Spot gold was up 0.3 per cent at US$2,054.73 per ounce, as at 0228 GMT, after marking its biggest daily gain since Dec 12 on Friday.

US gold futures rose 0.4 per cent to US$2,058.70.

The war between Israel and Hamas reached its 100th day as Israel continued its fierce offensive, while Houthi militia threatening a response to US air strikes on Yemen kept risks of escalations in the Middle East elevated.

Gold, historically seen as a safe store of wealth, tends to gain during times of political and economical uncertainty.

Bets for a Fed cut in March gathered some steam after data on Friday showed US producer prices unexpectedly fell in December, sending Treasury yields sliding in response.

The US Fed is expected to hold its policy rate steady at the Jan 30 to 31 meeting. Financial markets see a 79 per cent chance that rate cuts will begin in March.

Overall, traders are betting on 166 basis points (bps) of Fed rate cuts this year, higher than Friday morning’s bets of 150 bps, according to LSEG’s interest rate probability app, IRPR.

Lower interest rates increase non-yielding bullion’s appeal.

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However, Atlanta Federal Reserve president Raphael Bostic said inflation could “see-saw” if policymakers cut interest rates too soon.

The US dollar index eased 0.1 per cent against a basket of currencies, increasing bullion’s appeal for other currency holders.

Comex gold speculators cut their net long position by 31,228 contracts to 106,288 in the week ended Jan 9, data showed on Friday.

Spot silver rose 0.5 per cent to US$23.29 per ounce, platinum climbed 0.9 per cent to US$913.45, and palladium gained 0.7 per cent to US$982.38. REUTERS