Gold Tumbles As Ongoing Gulf War Pushes Up Oil Prices Again

(RTTNews) - Gold prices have slumped on Wednesday as the joint U.S.-Israeli strikes against Iran continue unabated, leading to a fresh surge in oil price that reinforced inflationary concerns and pushed the U.S. dollar value higher. In addition, traders parsed subdued U.S. consumer prices data.

Front Month Comex Gold for April delivery has tumbled by $59.7 (or 1.14%) to $5,182.40 per troy ounce.

Front Month Comex Silver for April delivery has plunged by $4.095 (or 4.59%) to $85.190 per troy ounce.

The U.S.-Israel attacks (Operation Epic Fury) on Iran that have erupted as a full-blown war entered day number 12 today.

On Monday, U.S. President Donald Trump claimed that the war in Iran would end "very soon." Trump's comments brought down oil prices yesterday.

However, CNN reported that Iran has started laying naval mines near the Strait of Hormuz. Infuriated by this, Trump warned Iran of "unprecedented consequences" if it does not remove the mines.

Ignoring Trump's threats, Iran stated that it will not allow even "one liter of oil" to pass through the strait until the U.S.-Israel attacks on Iran stop.

Around 20% of the world's oil and energy transit takes place through the Strait of Hormuz.

Iran's refusal to lay down arms has brought back the geopolitical risk premium to the picture as a result of which oil prices today catapulted.

WTI crude oil (for April delivery) was last seen trading at 86.29, up by 2.84 (or 3.40%).

While Israel continued its severe attacks on Lebanon, Turkish media reported sighting a U.S.-made Patriot air defense system on road in eastern Turkey to be deployed near a NATO radar base, indicating that the war could drag on indefinitely.

Market participants have wrapped up expectations of an interest rate cut by the U.S. Federal Reserve in the near-term.

Economists are of the view that major central banks across the world are likely to maintain their interest rates or even increase rates, if required, until Middle East tensions cool off.

According to CME Group's FedWatch Tool, investors are betting on only a scarce 0.60% chance of a quarter-basis-point interest rate cut at the Federal Reserve's upcoming meeting on March 17-18.

Generally, a stronger dollar makes gold prices expensive for overseas buyers and exerts downward pressure. The combination of increasing oil price and consolidating U.S. dollar value has hit gold prices recently.

Still, the underlying safe-haven demand has allowed prices to stay over the $5,000 an ounce levels so far.

In the U.S., the Mortgage Bankers Association of America's data revealed that their Purchase Index increased to 171.30 on March 6 from 158.90 in the previous week.

Further, the U.S. Labor Department's data on month-on-month core consumer prices rose by 0.2% from the previous month. A sharp rise was seen in consumer prices for medical care service (from 0.3% in January to 0.6%).

Year-on-year inflation stood steady at 2.4% for February, unchanged from January.

The year-on-year core consumer inflation rate stood at 2.5% in February, unchanged from January.

The U.S. dollar index was last seen trading at 99.20, up by 0.28 points (or 0.28%) today.