April 3 (Reuters) – Gold prices fell on Monday after OPEC+ announced a surprise oil production cut, fueling inflation worries and raising challenges to central bank rate hikes.
Spot gold was down 0.2% at $1,964.69 an ounce by 0924 GMT, having previously fallen to $1,949.54 in almost a week. US gold futures were also down 0.2% at $1,982.00.
OPEC+ production cuts have boosted the dollar, pushing gold lower, but some bargain hunters are coming in at $1960-$1965 levels, StoneX analyst Rona O’Connell said.
As energy is a “fairly high component of inflationary forces,” market-pricing higher rate hikes can be expected, he added.
European shares rose as oil heavyweights rallied on higher crude prices, but gains were limited and U.S. and European bonds rose on renewed inflation fears.
While gold has traditionally been seen as a hedge against inflation, high interest rates to curb rising price pressures have dimmed the asset’s appeal due to non-interest payments.
CME’s Fedwatch tool shows that Markets are watching 60.3% chance of the Fed hiking rates by a quarter point in May.
British manufacturers slumped in March but turned optimistic as cost pressures and supply chain issues eased, which could be viewed favorably by the Bank of England ahead of its next rate hike decision in May.
Silver rose nearly 8% last quarter after the latest global banking turmoil prompted bets that the central bank would scale back its rate-hike approach.
“Support zones are placed at $1,935 and $1,920, while a recovery to $1,980 would indicate strength,” Carlo Alberto De Casa, external analyst at Kinesis Money, said in a note.
Spot silver was down 1.3% at $23.75 an ounce, platinum was down 0.6% at $985.74 and palladium was up 0.9% at $1,473.03.
Reporting by Sehar Dareen and Kavya Guduru in Bangalore; Editing by Kirsten Donovan
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