Gold rises as traders await US inflation data

Bengaluru — Gold prices rose on Tuesday after falling more than 1% in the previous session, as the dollar eased while investors awaited this week’s US inflation data that could influence the Federal Reserve’s monetary policy trajectory.

Spot gold was up 0.4% at $1,997.69 an ounce at 3.04am GMT. US gold futures rose 0.4% to $2,012.30. The dollar index was 0.1% lower, making bullion cheaper for overseas buyers.

Traders are focusing on the US consumer price data due on Wednesday for more clarity on the path of rates heading into the Fed’s May policy meeting.

“A hotter-than-expected print may suggest that the Fed could still hike rates once more in May… gold’s rally higher has been somewhat excessive… chances of another Fed hike could kind of bring the overshoot down,” OCBC FX strategist Christopher Wong said.

A US employment report released on Friday pointed to a tight labour market and raised bets of an interest rate hike by the US central bank next month. Markets are pricing in a 71% chance of a 25 basis-point hike, according to the CME FedWatch tool.

The opportunity cost of holding the non-yielding bullion rises when interest rates are increased to bring down inflation.

Minutes of the Fed’s March 21-22 policy meeting will also be scanned on Wednesday.

“Near term, there are also bearish technical set-ups for a corrective move lower” in gold prices, OCBC’s Wong said.

Federal Reserve Bank of New York president John Williams said on Monday that financial system troubles that drove the central bank to provide large amounts of credit to banks were not collateral damage from the Fed’s aggressive effort to lower inflation.

Data on Tuesday showed top bullion consumer China’s March consumer inflation hit the slowest pace since September 2021 and suggested demand weakness persisted amid an uneven economic recovery.

Spot silver rose 0.2% to $24.94 an ounce, platinum added 0.4% at $995.71 and palladium gained 1.4% to $1,431.54.

Reuters