Gold falls to three month low

Bengaluru — Gold prices eased on Wednesday to a three-month low as an elevated dollar continued to restrain bullion while investors await monthly

US inflation data, which could have some effect on the Federal Reserve’s monetary policy stance. Spot gold was down 0.1% at $1,838.26/oz, as of 3.30am GMT, after hitting its lowest since February 11 earlier in the session. US gold futures dipped 0.2% to $1,836.50. US consumer price index (CPI) data for April is due at 12.30pm GMT.

The markets have priced in the current move in real yields ahead of CPI data. Higher real yields have been driving gold lower and supporting the dollar despite nominal yields easing, said Stephen Innes, managing partner at SPI Asset Management.

Analysts expect the CPI data to show a sharp pullback in monthly growth, cooling to 0.2% in April from 1.2% in the previous month, and an annual increase of 8.1%. The dollar hovered near recent 20-year highs, making greenback-priced bullion less attractive for other currency holders.

“The problem for gold investors and other commodities that have been used as an inflation hedge is that the Fed will at all costs raise rates to snuff out the inflation fires,” Innes said.

Fed officials on Tuesday fortified their arguments for the swiftest series of interest rate hikes since at least the 1990s to combat inflation, while President Joe Biden urged the US central bank to tame the price increases he said were hurting American households.

Gold is seen as a hedge against inflation and a safe store of value during times of political and economic crises, but is highly sensitive to rising short-term US interest rates, which raise the opportunity cost of holding zero-yield bullion.

Spot silver gained 0.8% to $21.40/oz, platinum rose 0.8% to $971.33, and palladium was up 0.1% at $2,067.47.

Reuters