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Gold Set for Worst Month in More Than 17 Years as US Rate-cut Hopes Fade

An Indian woman tries on gold ornaments at a jewelry shop in Bangalore (EPA)
An Indian woman tries on gold ornaments at a jewelry shop in Bangalore (EPA)
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Gold Set for Worst Month in More Than 17 Years as US Rate-cut Hopes Fade

An Indian woman tries on gold ornaments at a jewelry shop in Bangalore (EPA)
An Indian woman tries on gold ornaments at a jewelry shop in Bangalore (EPA)

Gold prices rose on Tuesday on hopes of de-escalation in the Middle East conflict, but were poised for their worst month in more than 17 years as higher energy prices dimmed hopes for a US interest rate cut this year.

Spot gold was up 1.1% at $4,561.68 per ounce, as of 0427 GMT. US gold futures for April delivery gained 0.7% to $4,590.

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

"Gold prices are bouncing in ⁠early Asia-Pacific trade ⁠after US President Donald Trump told aides he is willing to end the US military campaign against Iran... That triggered a risk-on response from financial markets," said Ilya Spivak, head of global macro at Tastylive.

Trump told aides that he is willing to end the military campaign against Iran even if the Strait of Hormuz remains largely closed and leave a ⁠complex operation to reopen it for a later date, the Wall Street Journal reported on Monday.

"Gold has been stabilizing for about a week now, with a rally last Friday a particular standout. That came alongside a drop in Treasury yields that seems to suggest the markets are starting to see the Iran war as a recession risk," Reuters quoted Spivak as saying.

Bullion has fallen more than 13% so far this month, putting it on track for its steepest decline since October 2008, weighed down by a stronger dollar and fading expectations of a US interest rate cut ⁠this year. ⁠Prices are still up about 5% for the quarter.

Traders have almost completely priced out any chance of a US Federal Reserve rate cut this year, as higher energy prices threaten to feed into broader inflation.

Gold tends to thrive in a low-interest-rate environment as it is a non-yielding asset.

Before the war in the Middle East erupted, there were expectations of two Fed rate cuts for this year, according to CME Group's FedWatch tool.

Goldman Sachs said in a note that it still expects gold to reach $5,400 per ounce by end 2026 on central bank diversification and Fed easing.

Spot silver rose 2.9% to $72.04 per ounce, spot platinum gained 0.6% to $1,911.15, and palladium was up 2% at $1,434.23.

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Business

Euro Zone Inflation Surges Past ECB Target on Oil Shock

Shelves filled with fruit inside a supermarket in Berlin (Reuters)
Shelves filled with fruit inside a supermarket in Berlin (Reuters)
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Euro Zone Inflation Surges Past ECB Target on Oil Shock

Shelves filled with fruit inside a supermarket in Berlin (Reuters)
Shelves filled with fruit inside a supermarket in Berlin (Reuters)

Euro zone inflation soared past the European Central Bank's 2% target this month due to surging oil and gas prices, heightening a policy dilemma as expensive energy drags growth and risks generating a self-reinforcing inflation spiral.

Oil prices have nearly doubled as a result of the Iran war and the ECB is now debating whether to raise interest rates to prevent this surge from becoming entrenched in the price of other goods and services, Reuters reported.

Overall inflation in the 21 countries sharing the euro currency jumped to 2.5% in March from 1.9% a month earlier, below expectations for 2.6% in a Reuters poll of economists, as energy costs rose 4.9%.

"The previously price-stable environment is saying goodbye" said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe. "What matters is that this inflationary dirt does not feed through into the core rate." A closely-watched figure on underlying inflation, which excludes volatile ⁠food and energy, ⁠meanwhile, fell to 2.3% from 2.4%, data from Eurostat, the EU's statistics agency showed on Tuesday.

Basic economic theory argues that central banks should look past one-off price shocks generated by supply disruptions, especially because monetary policy works with long lags.

But a quick rise in energy inflation can easily broaden out if companies start building this into selling prices and workers begin demanding higher wages for the loss of disposable income.

High energy prices should increasingly make other goods more expensive and push up core inflation, said Commerzbank's chief economist ⁠Joerg Kraemer, forecasting headline inflation will rise above 3% by May unless the war ends quickly. The public may also start doubting the ECB's resolve if it remains idle, firming the case for rate hikes even in the event of large but not so persistent inflation episodes, ECB President Christine Lagarde said last week.

Financial markets now see three interest rate hikes from the ECB this year, with the first in either April or June.

"The mounting inflation pressure suggests that the ECB will raise its key interest rates in April or, at the latest, in June," Kraemer said. While some policymakers, such as the influential Bundesbank head Joachim Nagel, said that a rate hike as soon as April was an option, others, including ECB board member Isabel Schnabel, have warned against hasty action.

But policymakers agree that the ECB must act if energy starts ⁠generating second round ⁠price pressures, especially since domestic inflation had been above 2% for years.

Services inflation, the single largest item in the consumer price basket and the key gauge for domestic inflation, fell to 3.2% in March from 3.4% a month earlier.

Part of the issue is that the ECB was late in recognizing the inflation problem in 2021/22, arguing for months that the surge was transitory and would pass. It only raised rates when price growth hit 8%, forcing the central bank into its steepest tightening cycle in its history.

But the bloc is now in a very different position, so comparisons with 2022 are not entirely valid.

Rates are already higher, budget policy is tighter, the labor market has been weakening for months and there is no pent-up demand created by pandemic-era lockdowns.

The ECB will next meet on April 30.

"We find it hard to see the ECB moving at the next meeting at the end of April," said Carsten Brzeski, global head of macro at ING. "Unless the ghosts of 2022 are really keeping policymakers awake at night."

Business

China Expresses 'Gratitude' after 3 Ships Transit Hormuz Strait

FILE - Ships sail through the Arabian Gulf toward the Strait of Hormuz as the sun sets in the United Arab Emirates Monday, March 23, 2026. (AP Photo, File)
FILE - Ships sail through the Arabian Gulf toward the Strait of Hormuz as the sun sets in the United Arab Emirates Monday, March 23, 2026. (AP Photo, File)
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China Expresses 'Gratitude' after 3 Ships Transit Hormuz Strait

FILE - Ships sail through the Arabian Gulf toward the Strait of Hormuz as the sun sets in the United Arab Emirates Monday, March 23, 2026. (AP Photo, File)
FILE - Ships sail through the Arabian Gulf toward the Strait of Hormuz as the sun sets in the United Arab Emirates Monday, March 23, 2026. (AP Photo, File)

Beijing expressed "gratitude" on Tuesday as it said three Chinese ships had transited the crucial Strait of Hormuz, which Iran has all but closed during the war in the Middle East.

"Following coordination with relevant parties, three Chinese vessels recently transited the Strait of Hormuz; we express our gratitude to the relevant parties for the assistance provided," foreign ministry spokeswoman Mao Ning told a regular press conference.

Mao did not offer ‌details about the ‌Chinese ships.

Ship-tracking data showed two Chinese container ships sailed through the Strait of ⁠Hormuz on Monday ⁠on their second attempt to leave the Gulf after turning back on Friday.

The vessels sailed in close formation out of the strait and into open waters, data on the MarineTraffic platform showed.

"Both vessels successfully crossed on a second attempt today, marking the first container vessels to leave the Persian Gulf since the start of the conflict, excluding Iranian flag vessels," said Rebecca Gerdes, data analyst with Kpler, which owns MarineTraffic.

"Both vessels are steaming at an elevated speed toward the Gulf of Oman at the moment."

Officials from China's COSCO, the shipping group that operates ⁠the two vessels, did not respond to requests for comment. COSCO had said in a March 25 client advisory, that it had resumed bookings for general cargo containers for shipments from Asia to the Gulf including the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Kuwait and Iraq.

Iran has launched attacks on Gulf shipping and threatened more, stranding hundreds of vessels and 20,000 seafarers inside the Gulf.

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UNDP: Arab Countries May Lose Up to $194 Billion from Iran War

FILE PHOTO: A cargo ship in the Gulf, near the Strait of Hormuz, as seen from northern Ras al-Khaimah in United Arab Emirates, March 11, 2026. REUTERS/Stringer/File Photo
FILE PHOTO: A cargo ship in the Gulf, near the Strait of Hormuz, as seen from northern Ras al-Khaimah in United Arab Emirates, March 11, 2026. REUTERS/Stringer/File Photo
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UNDP: Arab Countries May Lose Up to $194 Billion from Iran War

FILE PHOTO: A cargo ship in the Gulf, near the Strait of Hormuz, as seen from northern Ras al-Khaimah in United Arab Emirates, March 11, 2026. REUTERS/Stringer/File Photo
FILE PHOTO: A cargo ship in the Gulf, near the Strait of Hormuz, as seen from northern Ras al-Khaimah in United Arab Emirates, March 11, 2026. REUTERS/Stringer/File Photo

The military escalation in the Middle East, now into its fifth week, may cost economies in the region from 3.7 to 6 percent of their collective Gross Domestic Product (GDP), a staggering loss of $120-194 billion, a new United Nations study found.

“Coupled with an estimated rise in unemployment of up to 4 percentage points or 3.6 million jobs lost—more than the total jobs created in the region in 2025, these reversals will push up to 4 million people into poverty,” according to an analysis by the United Nations Development Programme (UNDP), which was released early Tuesday.

The assessment - “Military Escalation in the Middle East: Economic and Social Implications for the Arab States region” - exposes the concerning reality of structural vulnerabilities characteristic to the region, which enable a short lived military escalation to generate profound and widespread socio economic impacts that may persist over a long-term.

The agency said it had studied a number of different scenarios to determine how the conflict, which began on Feb. 28, might affect countries in the region. The report’s authors indicated that the damage could be profound, even if the war ends relatively soon.

“A short-lived military escalation in the Middle East could generate profound and widespread socio-economic impacts across the Arab States region,” they said.

“Since the escalation began, maritime security risks and attacks on tankers have sharply curtailed shipping activity through the Strait of Hormuz,” said the study.

The Strait remains the world’s most critical maritime energy chokepoint, it added.

It warned that even limited military escalation or accidental incidents affecting the Strait can rapidly destabilize global energy markets and trigger sharp price movements.

The study added that simulations suggest that the military escalation could generate substantial but uneven macroeconomic impacts across the Arab States region.

Simulations indicate the Gulf Cooperation Council countries would experience macroeconomic impacts. GDP is projected to decline between 5.2 percent under the moderate disruption scenario and 8.5 percent under the most severe scenario.

The Levant region (Iraq, Lebanon, Jordan and Syria) could experience significant macroeconomic losses across all scenarios. Compared to the No-War scenario GDP is projected to decline between 5.2 percent and 8.7 percent.

These translate into between approximately 2.8 and 3.3 million additional people pushed into poverty.

The Human Development Index (HDI) declines by approximately –0.2 to –0.4 percent, corresponding to a loss of roughly half a year to nearly one year of human development progress. These impacts are most pronounced in the Levant, where losses translate into setbacks of around one to one and a half years.

According to the study, the war could also have significant implications for the region’s monetary, fiscal and financial conditions.

“The region’s central banks may therefore need to raise interest rates and intervene in foreign currency markets to contain foreign exchange and inflationary pressures and to provide liquidity support to banks,” it said.