Gold steady as conflict-driven inflation fears counter dollar softness

LONDON, Mar 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 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.

US gold futures for April delivery fell 0.6 per cent to $5,031.50.

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

"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 US 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.