Gold falls as inflation risks following OPEC+ oil target cuts increase Fed hike odds

April 3 (Reuters) – Gold prices fell on Monday after a surprise announcement by OPEC+ of an oil production cut sparked inflation concerns and increased bids for a rate hike at the U.S. Federal Reserve’s upcoming May meeting.

Spot gold was down 0.6% at $1,956.89 an ounce, as of 0709 GMT, the lowest in nearly a week. U.S. gold futures fell 0.7% to $1,971.30.

The opportunity cost of holding non-yielding bullion rises when interest rates are raised to reduce inflation.

Gold has fallen “as investors weigh up the lure of gold as a safe haven, versus the potential for higher-for-longer interest rates. It’s clear that fears of inflation and higher interest rates have won the argument,” Matt Simpson said. senior market analyst at City Index.

Oil prices rose after Saudi Arabia and other OPEC+ oil producers announced a round of output cuts, a potentially ominous sign of global inflation just days after a drop in US price data had boosted market optimism.

US consumer spending rose moderately in February and showed signs of cooling, although it remained high.

“Gold is now vulnerable to a move down to $1,900, given the potential for a higher terminal Fed rate that markets are currently pricing in,” Simpson added.

and government bonds.

ANZ, in a note, observed gold’s “safe haven demand easing as the US banking crisis eased.”

Bullion had risen nearly 8% last quarter after the recent global banking crisis led to suggestions that the Fed would tone down its rate hike approach.

Standard Chartered analyst Suki Cooper said in a note that gold purchases by central banks may “not be as strong as they were in 2022.”

Spot silver fell 1.6% to $23.69 an ounce, platinum lost 0.5% to $986.83, and palladium fell 0.4% to $1,455.16.

Reporting by Kavya Guduru in Bengaluru; editing by Janane Venkatraman and Jason Neely

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