PRECIOUS- Gold steady as conflict-driven inflation fears counter dollar softness

By Ashitha Shivaprasad

March 16 (Reuters) - Gold prices were little changed on Monday, as concerns that inflation stemming from the Middle East conflict could keep interest rates higher for longer outweighed support from a softer dollar and safe‑haven demand.

Spot gold XAU= held steady at $5,025.16 per ounce, by 09:22 a.m. ET (1322 GMT), after hitting its lowest level since February 19 earlier in the session.

U.S. gold futures GCcv1 for April delivery fell 0.6% to $5,031.50.

The dollar pulled back from a 10-month peak, making dollar‑priced bullion more attractive to holders of other currencies. USD/

"With higher oil prices comes higher inflation. If we do have higher inflation, central banks are not going to be as motivated as they were six months ago to cut rates, which is a negative for gold prices," said Bob Haberkorn, senior market strategist at RJO Futures.

"But I’m still very bullish on gold, given what’s happening around the world. A lot of money is still on the sidelines waiting to enter this market, and I’m still anticipating $6,000/oz gold."

Gold, typically an inflation and uncertainty hedge, tends to underperform in high-rate environments because the opportunity cost of holding a non‑yielding asset rises.

Oil prices fell on Monday amid attacks on Gulf oil production and U.S. President Donald Trump's call for global efforts to secure the Strait of Hormuz. Japan and Australia said they were not planning to send navy vessels to escort ships through the vital waterway.

Also on the market’s radar this week are the U.S. Producer Price Index (PPI) data, the Federal Reserve’s policy decision, Chair Jerome Powell’s speech, and weekly U.S. jobless claims numbers.

The Fed is expected to hold rates steady at its meeting on Tuesday and Wednesday. Data since the last meeting showed little change in the underlying outlook, and the Fed is transitioning to a new leader, Kevin Warsh, nominated by Trump.

Elsewhere, spot silver XAG= was flat at $80.52. Spot platinum XPT= gained 3.6% at $2,096.75 and palladium XPD= rose 2.5% to $1,589.40.