Gold firms ahead of US inflation data

Bengaluru — Gold prices rose on Tuesday as the dollar retreated, with investors bracing for US inflation data that could determine the Federal Reserve’s next moves in its monetary policy plans.

Spot gold was up 0.2% at $1,857.22 an ounce at 3.05am GMT, after falling to its lowest since early January in the previous session. US gold futures rose 0.3% to $1,868.40.

Gold is sensitive to rising interest rates, which lift the opportunity cost of holding the non-yielding asset.

“If the disinflation trend in the US shows signs of slowing (even if it is temporary), then caution over a hawkish Fed could undermine risk sentiment and gold while USD may find further support,” OCBC FX strategist Christopher Wong said.

Investors are awaiting January’s US consumer price index (CPI) data due later in the day. Economists polled by Reuters expect the headline CPI figure gaining 0.5% month on month.

However, if the CPI comes in softer than expected then the US central bank could potentially afford to slow rate hikes and “this could imply a resumption of USD softness and gold rebound”, Wong said.

Several Fed policymakers have signalled that more interest rate hikes were needed to bring inflation down to its 2% target. Money markets expect the Fed’s target rate to peak at 5.193% in July, from a current range of 4.5% to 4.75%.

“Bullion traders are trying to anticipate the Fed’s next move, with indications it may need to stay hawkish for longer,” analysts at ANZ said in a note. “Nevertheless, we expect a weaker USD will remain on a downward trajectory for the rest of the year, putting upward pressure on the precious metal.”

The dollar index slipped 0.1%, making greenback-priced gold less expensive for buyers holding other currencies.

Spot silver was little changed at $21.96 an ounce, platinum eased 0.1% to $952.42, while palladium rose 0.3% to $1,570.94.

Reuters