Gold slips in mid-March, weighed by stronger dollar, reduced rate cut expectations
Gold prices edged down in mid-March, weighed by a firmer U.S. dollar and reduced expectations of U.S. interest rate cuts as the Middle East war widened.
Stubborn inflation and resilient U.S. consumer spending, combined with rising inflationary expectations due to the war, have scaled back prospects for interest rate cuts in the world’s largest economy, analysts say.
Gold was 1.57 percent lower to USD $5,018.10 per ounce on March 13, down for a second straight week.
Monetary policy expectations were having a bigger impact on the gold price than geopolitical uncertainties, analysts said.
Also, the U.S. dollar has been acting as a “safe haven” for flights of funds, against the backdrop of the Middle East war.
If the war continues to widen and bottlenecks in oil supplies aggravate, surging oil prices could rise further, hiking inflation, and possibly eroding further U.S. rate cut expectations.
Many analysts have scaled back U.S. rate cut expectations already to just one cut this year, from previous expectations of two cuts in 2026.
If war in the Middle East were to end sooner rather than later, oil supplies would recover and inflationary expectations could ease, but many analysts now foresee a lengthening war with more uncertainties in the oil market.
“The monetary factors are re-establishing themselves as the main drivers of gold and will continue to do so all the more once the Iran conflict ends,” Adrian Day, President of Adrian Day Asset Management, was quoted as saying by Kitco News.
“In the meantime, there will be some fluctuations based on developments and announcements, but, after an initial reaction, geopolitical events are usually subordinate to monetary factors for gold.”
The British pound (GBP) hit a 14-week low against the U.S. dollar on March 13, marking four straight days of losses driven by stagnant UK economic growth and soaring oil prices due to the war in the Middle East.
Rising inflationary pressures due to the surge in oil prices, have raised the possibility of a 25-basis-point rate hike by the Bank of England, ending the latest trend for falling UK rates.
Analysts see heightened expectations of a UK interest rate rise (or a “higher for longer” scenario) as of March 2026, marking a significant reversal from earlier market optimism regarding rate cuts.
