Gold eases as Banks signal more rate hikes to rein in inflation

Bengaluru — Gold prices ticked lower on Monday as central banks indicated further interest rate hikes to tame stubbornly high inflation, diminishing bullion’s appeal as a hedge against price increases.

Spot gold was down 0.1% at $1,853.99 per ounce by 5.05am, after climbing to its highest since February 15 on Friday. US gold futures rose 0.3% to $1,859.90.

Interest rate hikes to contain high inflation discourage investors from placing money in non-yielding assets such as gold.

“More sustained moves [in gold] may be driven by hard data — US non-farm payroll, where a weaker-than-expected figure will be looked upon to push back against January’s strong labour data as a one-off,” said Yeap Jun Rong, a market analyst at IG.

Investors are awaiting US Federal Reserve chair Jerome Powell’s testimony to Congress on Tuesday and Wednesday, and the February payrolls report on Friday for monetary policy clues.

San Francisco Fed president Mary Daly said on Saturday if data on inflation and the labour market continued to come in hotter than expected, interest rates would need to go higher, and stay there longer. Richmond Fed president Thomas Barkin said on Friday he could see US rates in the 5.5%-5.75% range.

Data on Friday showed the US services sector grew at a steady clip in February, with new orders and employment rising to more than one-year highs.

“We see a trading range of $1,775-$1,900 as we expect to see the March [Federal Open Market Committee] meeting to come across as more hawkish than investors are hoping for,” Edward Meir, a metals analyst at Marex, wrote in a monthly note.

Underlying inflation in the eurozone will stay high in the near term, so a 50 basis-point rate increase later this month is increasingly certain, European Central Bank president Christine Lagarde said.

Spot silver firmed 0.1% to $21.27 per ounce, platinum slipped 0.3% to $974.36 and palladium was down 0.2% at $1,449.82.

Reuters