Gold languishes near two-month low

Bengaluru  — Gold struggled near a two-month low on Thursday, as investors assessed comments from two US Federal Reserve officials on unexpectedly high January inflation that has tempered the hope for swift and deeper interest rate cuts this year.

Spot gold was flat at $1,991.70/oz, at 4.41am GMT, after hitting its lowest since December 13 on Wednesday. US gold futures were flat at $2,003.40/oz.

“After a sharp fall in gold prices [on Wednesday], we see some consolidation. But today’s [economic] data points will give more clarity,” said Ajay Kedia, director at Kedia Commodities in Mumbai.

“The dollar’s move would be important to watch as it may retest its highs, weakening gold prices.”

The US dollar index held below a three-month peak. A stronger dollar makes gold more expensive for buyers in other currencies.

Fed vice-chair for supervision Michael Barr backed the “careful approach” to cutting rates advocated by chair Jerome Powell, while Chicago Fed president Austan Goolsbee warned against waiting too long.

The comments came after an upside surprise in US consumer prices, which sent bullion 1.4% lower on Tuesday in its biggest daily decline since December 4.

Traders are now pricing in 97 basis points (bps) of rate cuts for this year, up from about 85bps early on Wednesday but down from over 110 bps before the inflation data. The first cut is likely to arrive in June now.

In the near term, spot gold could fall towards the $1,950 level, “which should be a good zone to take a long position”, said Kedia.

Focus is now on the US retail sales data due at 1.30pm GMT and producer price index numbers due on Friday. At least three more Fed officials are due to speak later this week.

Among other precious metals, palladium dropped 0.5% to $929.95/oz. It rose more than 8% on Wednesday on short-covering, regaining its premium against platinum.

Spot platinum fell 0.3% to $886.51/oz and silver slipped 0.1% to $22.40.

Reuters