April 3 (Reuters) – Gold fell on Monday after OPEC+’s surprise announcement of production cuts raised inflation concerns and raised the possibility of further rate hikes by the central bank.
Spot gold was down 0.2% at $1,964.69 an ounce by 0924 GMT, after nearly a week’s low at $1,949.54, while U.S. gold futures were down 0.2% at $1,982.00.
The automatic reaction to OPEC+’s production cuts and the appreciation of the dollar have pushed gold prices down, but few bargain hunters have reached 1960s-1965s levels, StoneX analyst Rona O’Connell said.
He said that because energy is a “fairly high component of inflationary factors,” there could be more rate hikes and the market is pricing them in.
European stocks rallied as oil giants rallied on rising crude prices, but gains were limited, with U.S. and European bonds rising as inflation fears revived.
Gold has traditionally been seen as a hedge against inflation, but higher interest rates that limit rising price pressures will reduce the asset’s appeal as interest is not paid.
CME’s Fedwatch instrument market index indicates a 60.3% chance the central bank will raise rates by 1/4 point in May.
UK manufacturers suffered a deep decline in March, but turned optimistic as cost pressures and supply chain issues eased. This could be viewed favorably by the Bank of England ahead of its next rate hike decision in May.
Gold rallied nearly 8% last quarter as the latest global financial turmoil bet the central bank will ease its rate hike approach.
“There is a support area at $1,935 and $1,920, and a recovery at $1,980 could be positive,” Kinesis Money external analyst Carlo Alberto De Casa said in a note.
Spot silver was down 1.3% at $23.75 an ounce, platinum was down 0.6% at $985.74 and palladium was up 0.9% at $1,473.03.
Reporting by Sehar Dareen and Kavya Guduru in Bangalore; Edited by Kirsten Donovan
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