Gold prices are seen displaying a slight downward trend after making gains in the previous session as the US dollar recovered following US inflation data that met widespread expectations.
At 8.40 am, gold prices were at $5,157, down 0.38% since it opened in early trading on Thursday in the Asian session.
The latest US inflation data showed that price pressures were still moving in a controlled manner, but not low enough to give the Fed much room to ease monetary policy in the near future.
The Consumer Price Index (CPI) rose 0.3% month-on-month in February, in line with market expectations and higher than the 0.2% increase in January. On an annual basis, headline inflation remained at 2.4%, also in line with analysts' forecasts.
Meanwhile, the core CPI, which excludes food and energy prices, recorded a 0.2% monthly increase, slightly slower than the 0.3% increase in the previous month. The annual reading of the core CPI remained at 2.5%.
The data shows that inflationary pressures remain despite the gradual downward trend. Inflation is still above the Fed's 2% target, indicating that the disinflation process is not yet complete.
In this situation, the Fed is expected to keep interest rates unchanged at its meeting next week. However, policymakers are likely to continue to take a cautious approach and wait for stronger evidence of inflation before considering any monetary easing.
At the same time, geopolitical tensions remain the main driver of global market sentiment as the conflict between the United States and Iran enters its 12th day with no clear sign of abating.
The United States and Israel reportedly continue to attack Iranian military targets, while Tehran retaliates with missiles and drone attacks on US and Israeli assets in the Middle East.
US President Donald Trump has said that the war may end soon, but developments on the ground still show that the conflict is escalating.
Market attention is now focused on the Strait of Hormuz, the world's most important energy trade route. Shipping activity in the area is reported to be slowing due to increased security risks.
The US military also said it had destroyed 16 Iranian ships believed to be preparing to lay naval mines near the strait.
The tensions have left energy markets volatile as traders try to assess the potential disruption to global oil supplies.
In a move to stabilise energy prices, the International Energy Agency (IEA) has reportedly agreed to release around 400 million barrels of oil from its member countries' strategic reserves.
Despite rising geopolitical uncertainty, gold has failed to attract strong safe-haven demand. Investors are seen preferring the US dollar due to its greater liquidity when markets are under pressure.
At the same time, the risk of a prolonged conflict that could push up oil prices has also raised concerns about global inflation.
This situation has the potential to complicate the Fed's efforts to ease monetary policy while supporting a strengthening US dollar, thus limiting gold's rise.
