Gold finds respite from five-week trough, inflation concerns linger

NEW YORK (May 5) Gold prices rebounded on Tuesday from the ‌previous session's five-week low, as oil prices edged lower, but persistent Middle East tensions and inflation concerns kept gains in check.

Spot gold rose 0.7% to $4,553.41 per ounce by 0935 GMT, after touching its ​lowest level since March 31 on Monday. U.S. gold futures for June delivery ​gained 0.7% to $4,563.50.

"A pullback in the oil price on profit-taking, despite ⁠tensions being intensified in the Middle East, has given a lift to gold ​from a five-week low, as fear seems to have become normalised," said independent analyst ​Ross Norman.

Brent crude futures retreated on Tuesday but held above $110 a barrel, while investors monitored Middle East developments.

The fragile ceasefire in the region appeared to be fraying once more as the U.S. and Iran ​launched renewed attacks, competing for control of the Strait of Hormuz, amid conflicting ​reports about ships passing through the strait in recent days.

Since the start of the U.S.-Israeli war ‌on ⁠Iran in late February, gold prices have been inversely proportional to crude. Despite being a hedge against geopolitical volatility, soaring energy costs have stoked fears of a spike in inflation and lowered hopes of rate cuts, pushing gold down more than 13%.

Non-yielding bullion loses ​its appeal in high ​interest rate environments ⁠as investors turn to assets that offer better returns.

"Although gold's fundamentals point to good gains later this year, the market is clearly in ​an extended consolidation phase just now and through the physical ​market is ⁠attempting to establish a price floor, especially after epic moves in Q1," Norman said.

Meanwhile, investors are also looking out for a slew of jobs data including job openings, the ADP employment ⁠report ​and the April payrolls report this week, that is ​likely to govern the U.S. Federal Reserve's policy path.

Spot silver firmed 1.3% to $73.69 an ounce, platinum gained 1.7% to $1,977.20, ​and palladium rose 1.8% to $1,507.01.

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