Gold bounces back from three-week low

Bengaluru — Gold prices picked up on Tuesday from a three-week low, helped by a pullback in the dollar after an official US report showed that consumers expected lower inflation cemented bets for interest rate cuts from the US Federal Reserve.

Spot gold was up 0.3% at $2,034.49 an ounce at 3.16am GMT, after hitting a three-week low on Monday. US gold futures rose 0.4% to $2,040.60 an ounce.

A New York Federal Reserve report on Monday said consumers expected lower inflation, as well as weaker income and spending over the next several years. The Fed survey may help to provide some support for gold prices as it brings “further relief to the inflation picture and has provided more room for Fed officials to consider earlier rate cuts in 2024”, IG market strategist Yeap Jun Rong said.

The dollar index weakened 0.1%, making bullion more attractive for other currency holders. Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

However, “given the strong rebound in risk-on sentiments overnight, gold prices have to balance a dovish rate outlook with potential safe-haven outflows as well,” Rong said.

Last week’s stronger-than-expected jobs data, coupled with the latest Fed minutes that noted an uncertainty over timings of rate cuts, tempered sentiment for an early interest rate cut in the US.

Market participants are pricing in an about 62% chance of a rate cut by the US central bank in March, down from a nearly 90% probability seen before the New Year, according to the CME FedWatch tool. Investors await Thursday’s US consumer price inflation report for further clarity on the scale and depth of Fed’s rate cut.

Spot silver rose 0.3% to $23.15 an ounce, while platinum climbed 0.4% to $949.29, and palladium gained nearly 1% to $1,007.01.

Reuters