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Gold Firms on Softer Dollar, but Dimming Fed Rate-cut Hopes Cap Rise

An Indian woman displays a gold jewelry piece at a jewelry store in Bangalore (AFP)
An Indian woman displays a gold jewelry piece at a jewelry store in Bangalore (AFP)
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Gold Firms on Softer Dollar, but Dimming Fed Rate-cut Hopes Cap Rise

An Indian woman displays a gold jewelry piece at a jewelry store in Bangalore (AFP)
An Indian woman displays a gold jewelry piece at a jewelry store in Bangalore (AFP)

Gold rose on Monday as the dollar softened, but gains were capped by a surge in energy prices that fueled inflation worries and further dimmed expectations for US Federal Reserve interest rate cuts this year.

Spot gold rose 0.8% to $4,528.74 per ounce as of 0627 GMT after falling about 1% earlier in the session. US gold futures for April delivery gained 0.7% to $4,556.70.

The US ‌dollar eased, making ‌dollar-denominated commodities more affordable for holders of other ‌currencies.

"Gold's ⁠price action last ⁠week (when it snapped a three-week losing streak) suggested a reaction to oversold behavior, and a possible reversal of recent declines. However, this needs to be confirmed by price action this week. Given the rapid flow of headline news, it's easiest to expect volatility," said Nicholas Frappell, global head of institutional markets at ABC Refinery.

Brent crude rallied above $115 ⁠a barrel after Yemeni Houthis launched attacks on Israel ‌over the weekend, widening the ongoing ‌war and adding to inflation woes. The contract is up 60% so far ‌in March, a record monthly rise.

Traders see little chance ‌of a US rate cut this year, as higher energy prices threaten to feed into broader inflation and limit scope for monetary easing. That compares with expectations for two rate cuts before the conflict began.

While inflation typically boosts ‌gold's appeal as a hedge, elevated interest rates weigh on the non-yielding metal's demand.

Markets now await Federal ⁠Reserve Chair ⁠Jerome Powell's remarks at a Harvard event later in the day, as well as remarks from New York Fed President John Williams.

Gold has fallen more than 14% so far this month, marking its steepest monthly decline since October 2008, pressured by the US dollar, which has gained more than 2% since the US-Israeli war on Iran began on February 28. However, bullion is up about 5% so far this quarter.

"The bigger macro picture behind that underperformance is the huge shift in interest rate expectations... The USD has picked up on that," said Frappell.

Spot silver rose 1.5% to $70.61 per ounce. Spot platinum gained 3.4% to $1,925.85 and palladium rose 3% to $1,417.75.

 

 

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Business

Saudi Aramco: Oil Refining Has Been Underinvested

FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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Saudi Aramco: Oil Refining Has Been Underinvested

FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The current oil supply crisis shows there is underinvestment in oil refining as demand holds resilient, Saudi state-owned Aramco's vice president of market analysis and sustainability, Musaab Al Mulla, said on Tuesday.

Around 3 ⁠million barrels per ⁠day of refining capacity closed between 2020 and 2023, Al Mulla said at the S&P Global Energy Middle East ⁠Petroleum and Gas Conference in London.

"Now we realize if you have those refineries you may have definitely mitigated the impacts of the crisis today," he said.

The war in Iran, attacks on energy infrastructure and ⁠Iran's effective ⁠closure of the Strait of Hormuz followed by a US naval blockade, have removed around 14 million bpd of oil supply from Middle East producers to the global market.

Business

OECD Cuts 2026 Global Growth Forecasts Over Mideast War Fallout

A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)
A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)
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OECD Cuts 2026 Global Growth Forecasts Over Mideast War Fallout

A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)
A drone view of vessels anchored in the Strait of Hormuz as seen from Musandam, Oman, June 3, 2026. (Reuters)

The war in the Middle East has dented economic growth prospects worldwide, with a more severe shock likely if no effective ceasefire is agreed before 2027, the OECD warned Wednesday.

Global economic growth is now forecast to slip to 2.8 percent for 2026 if Gulf exports of oil and gas return to pre-conflict levels in the third quarter, the group of 38 industrialized countries said in its quarterly update.

Previously the OECD had forecast full-year global growth of 2.9 percent.

But if the Middle East war continues into next year, however, global growth could slow to 2.1 percent, the OECD said -- well below the average annual growth of 3.4 percent seen from 2013 to 2019, before the Covid pandemic.

"The longer the disruptions last, the larger the economic and social costs become," the group's chief economist Stefano Scarpetta said in the report.

Many countries would risk falling into recession, he noted, and a drop in investment spending -- "including in energy-intensive AI" -- would likely push up unemployment.

Sustained high prices for energy as well as fertilizer and other key products from hydrocarbon production in the Gulf would weigh especially hard on developing countries that have "higher shares of energy and food in household consumption".

Even if the war sparked by US and Israeli strikes on Iran in late February ends in the coming weeks, the OECD forecast global inflation rising to 4.0 percent this year from 3.4 percent in 2025.

In this "time-limited disruption scenario", the group expects US growth to slow to 2.0 percent this year and 1.8 percent in 2027, after growing 2.1 percent last year.

In the eurozone, where many countries are highly dependent on energy imports, GDP growth will slump to 0.8 percent this year after 1.4 percent last year, assuming a Mideast ceasefire is secured in the coming weeks.

Business

Saudi Non-oil Private Sector Activity Hits 3-month High in May

The Saudi capital, Riyadh (Reuters)
The Saudi capital, Riyadh (Reuters)
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Saudi Non-oil Private Sector Activity Hits 3-month High in May

The Saudi capital, Riyadh (Reuters)
The Saudi capital, Riyadh (Reuters)

Saudi Arabia's non-oil private sector expanded at the fastest pace in three months in May as domestic demand improved and supply chains stabilized, while business optimism remained subdued amid conflict in the region, a survey showed on Wednesday.

The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index, compiled by S&P Global, rose to 52.8 in May from 51.5 in April. The 50 mark separates growth from contraction, Reuters reported.

Output accelerated at the ⁠fastest pace in ⁠three months after March's downturn following the start of the Iran war, as firms cited normalizing working conditions, revived contracts and stronger local demand.

Export sales fell for a third straight month, hit by shipping disruption, higher freight and fuel costs, geopolitical tensions and stronger competition. The pace of decline eased only modestly from April's survey-record contraction.

However, supply chains improved, with suppliers' delivery times shortening for the first time in three months as ⁠firms relied ⁠more on local vendors. Backlogs of work rose for an 11th consecutive month, albeit moderately.

“Overall, the latest PMI reading supports the expectation that Saudi Arabia’s non-oil economy will continue its upward trend during the remainder of 2026," said Naif Al-Ghaith, Riyad Bank's chief economist.