Gold prices inch down as oil climbs, dollar firms amid ongoing Iran conflict

Gold prices edged lower on Thursday, as few signs of de-escalation in the U.S.-Israel war with Iran spurred flows into higher energy prices stoked inflation fears.

Spot gold had slid by 0.5% to $5,149.76 an ounce and gold futures had dropped by 0.5% at $5,155.10/oz as of 10:37 ET (14:37 GMT). 

Bullion has continued to flit between the $5,000-$5,200 an ounce level, pressurized by a recent spike in oil prices which some analysts fret could reignite inflation. Brent crude futures, the global benchmark, were last hovering around the $100 a barrel level, underpinned by supply disruptions through the vital Strait of Hormuz waterway south of Iran.

Central banks, such as the Federal Reserve, may be forced to reconsider near-term interest rate cuts should inflation accelerate. Higher borrowing costs may attract more foreign investment, bolstering the appeal of the dollar.

A stronger greenback can dent gold, making the yellow metal more expensive for overseas buyers and taking the sheen off of its traditional safe-haven appeal. The dollar index last rose roughly 0.3%, close to a two-month high.

PCE inflation data awaited

Beyond the Iran conflict, investors were also keeping tabs on U.S. inflation data this week.

Consumer price index figures on Wednesday showed inflation remained largely steady in February from the prior month. But the print did not reflect the inflation bump from rising oil prices due to the U.S.-Israeli campaign in Iran. 

The personal consumption expenditures price index for January, due later this week, is expected to provide more cues on U.S. inflation. Crucially, the number is the Fed’s preferred inflation gauge, and is likely to factor into expectations for long-term rates.