Gold prices showed a strong trend of almost 1% during the week as the US dollar was positive, while US Treasury yields fell despite expectations that the Fed will keep rates on hold through 2026.
At 9.15 am, gold prices were at $4.545, up 0.77% since it opened in early trading on Tuesday in the Asian session.
The ongoing conflict in the Middle East continued to push energy prices higher, thus changing market expectations for the direction of global monetary policy.
The surge in oil prices prompted some traders to expect higher interest rates, but at the same time, the risk of prolonged conflict raised concerns about slower economic growth.
This situation puts central banks in a dilemma between controlling inflation and supporting growth. If the pressure on the economy becomes more pronounced, the central bank is likely to maintain or loosen monetary policy to avoid a more serious slowdown.
West Texas Intermediate (WTI) crude oil prices continued to rise for the fourth consecutive day, rising more than 1.30% to $100.39 per barrel. This increase supported the strengthening of the US Dollar, but at the same time also provided support for safe-haven assets such as gold.
However, gold is expected to close March with a loss of more than 10%, reflecting the still significant pressure in the precious metals market.
Fed Chairman Jerome Powell stressed that the central bank remains committed to lowering inflation to its 2% target despite challenges from external factors such as geopolitical conflicts and tariffs.
He noted that tariffs could contribute an additional 0.5% to 1% in inflation, thus adding pressure on consumer prices.
Powell also described the current monetary policy as being in an appropriate position, while acknowledging that tensions in the Middle East are having a direct impact on energy prices.
However, he stressed that long-term inflation expectations remain stable and the central bank is ready to act if the situation changes.
In a related development, Fed Governor Stephen Miran said that the rise in oil prices has not yet had a significant impact on inflation expectations. He also said there was no evidence of a spiral of rising prices and wages, reducing concerns about prolonged inflationary pressures.
The US Dollar Index (DXY) rose 0.29% to 100.48, reflecting support from rising energy prices and current market sentiment. However, the yield on the 10-year US Treasury note fell almost 9 basis points to 4.34%, as money markets began to increase expectations of a possible interest rate cut by the Fed.
The market still sees the Fed on hold rates through 2026, with the first potential cut only expected around mid-2027. This dynamic reflects high volatility in the market, driven by a delicate balance between inflationary pressures and global growth risks.
