Gold edges up, but set for second monthly fall on inflation fears

Gold edged higher on Thursday on dip-buying, but was on track for a second straight monthly fall as elevated oil prices kept fears alive of inflation and higher-for-longer interest rates. Spot gold was up 0.5% at $4,567.16 per ounce, as of 0549 GMT, after falling to its lowest point since March 31 in the last session. Bullion was down about 2.2% so far this month. U.S. gold futures for June delivery rose 0.4% to $4,578.10. "Gold has struggled again this month as oil strength has dominated the narrative. Rising crude pushes up inflation expectations and interest rate forecasts, which in turn caps gold's appeal," said Tim Waterer, chief market analyst at KCM Trade. However, "a combination of bargain-hunting and expectations that a peaceful resolution to the (U.S.-Iran) conflict will be found at some point are providing something of a floor for gold," he said. Brent crude rose above $124 a barrel on a report that the U.S. was considering potential military action against Iran to break the deadlock in negotiations to end the war, increasing concerns of more supply disruptions to already curtailed Middle East exports. The Federal Reserve held interest rates steady on Wednesday, but in its most divided decision since 1992 noted rising concerns about inflation in a policy statement that drew three dissents from officials who no longer feel the U.S. central bank should communicate a bias towards lowering borrowing costs. Traders are now pricing out Fed rate cuts entirely for this year, with markets now seeing a 30% chance of a hike by March 2027, sharply up from roughly 5% a day prior. While gold is traditionally seen as a hedge against inflation, high interest rates weigh on its appeal as a non-yielding asset. Meanwhile, U.S. President Donald Trump discussed how to mitigate the impact of a possible months-long U.S. blockade of Iran's ports with oil companies. Spot silver rose 1.1% to $72.26 per ounce, platinum gained 1.9% to $1,914.85, and palladium was steady at $1,458.75. All three metals were also on track for a second straight monthly fall.