Gold falls from one-month peak on stronger US dollar, bond yields

Gold retreated on Wednesday from a one-month peak scaled in the previous session, though prices flitted in a relatively tight range as cautious investors positioned ahead of US inflation data due later this week.

Spot gold was down 0.2% at $1,708.94 per ounce at 4.14am GMT. US gold futures fell 0.3% to $1,711.60.

Bullion prices rose more than 2% to breach the key $1,700 level on Tuesday, after a fall in the dollar and bond yields, as well as some technical buying.

“Gold prices are slightly lower due to a combination of factors. The dollar is a little bit firm, yields are going up and there is some level of profit-taking after yesterday’s rally,” said Stephen Innes, managing partner at SPI Asset Management.

The dollar index edged up 0.1%, making gold more expensive for overseas buyers. US treasury yields also crept higher in Asian hours.

Investors’ focus remains on the US consumer price index (CPI) report due on Thursday. The data is likely to offer cues on the US Federal Reserve’s rate-hike stance.

Wall Street economists expect a deceleration in both the monthly and yearly core CPI to 0.5% and 6.5%, respectively, according to a Reuters poll.

“Prices seem to be consolidating ahead of CPI. If the US CPI print is hotter than expected, prices could move below $1,690 and if not, gold might break the $1,725 level,” Innes added.

Traders now see a 66% chance of a 50-basis-point (bps) rate hike and 34% chance of a 75 bps hike at the Fed’s December meeting.

Gold is seen as a hedge against inflation, which rising rates aim to tackle, thereby diminishing the metal’s appeal. Higher interest rates also make other assets more attractive compared with non-interest-bearing bullion.

Spot silver fell 0.2% at $21.30. Platinum rose 0.7% to $1,004.00, while palladium was down 0.3% at $1,914.82.