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Gold caught in tug-of-war between raging dollar and safe-haven demand

Gold prices are stuck in a tug-of-war on Thursday, despite initial weakness following hotter-than-expected CPI data. The yellow metal, which recently hit record highs, dipped after Wednesday’s data showed inflation remaining stubbornly sticky. This coincided …

Gold prices are stuck in a tug-of-war on Thursday, despite initial weakness following hotter-than-expected CPI data.

The yellow metal, which recently hit record highs, dipped after Wednesday’s data showed inflation remaining stubbornly sticky. This coincided with a surge in the dollar to five-month highs. By early Thursday morning GMT, however, gold had clawed its way back to around $2,340 per ounce, supported by safe-haven demand and central bank buying.

The Federal Reserve’s hawkish tilt is a key concern for gold bulls. Minutes from the Fed’s March meeting released on Wednesday indicated growing anxieties over inflation and a call for stricter monetary policy. Higher interest rates, generally negative for gold, could limit further gains as they make non-yielding bullion less attractive. The data also prompted traders to slash their expectations for a June rate cut, according to the CME Fedwatch tool.

Countering this pressure is the ongoing demand for gold as a safe-haven asset amid global geopolitical and economic jitters. Major central banks in Asia and emerging markets have been steadily increasing their gold holdings in recent months, providing some price support.

Investors will be closely watching the release of the U.S. Producer Price Index (PPI) later on Thursday for further clues on inflation. Analysts predict a 2.2% year-on-year rise in headline PPI and a 2.3% increase in core PPI.


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