Gold prices remain stable as focus shifts to US inflation data

By Sherin Elizabeth Varghese

Gold prices stall ahead of key inflation data

Gold prices remained steady on Wednesday as investors awaited crucial U.S. inflation data scheduled to be released this week. The data could provide more clarity on when the Federal Reserve might implement its first interest rate cut of the year.

Spot gold held flat at $2,319.95 per ounce, while U.S. gold futures stood firm at $2,331.30 as of 0337 GMT. The dollar saw a 0.1% uptick against other currencies, making gold more expensive for holders of other currencies. In addition, benchmark 10-year yields also saw a slight increase.

Insight: Impact of Fed comments on gold prices

The overnight rise in Treasury yields and a stronger U.S. dollar, following hawkish comments from Fed officials, have put pressure on gold prices. The market sentiment was not supportive of a quicker policy easing, as policymakers did not verify the call for immediate action.

U.S. Fed Governor Michelle Bowman reiterated her belief that keeping the policy rate stable “for some time” would likely be sufficient to manage inflation. However, she also mentioned being open to raising borrowing costs if necessary. On the other hand, Fed Governor Lisa Cook hinted at the possibility of cutting interest rates in the near future.

Key economic data and potential risks

Traders are eagerly awaiting the U.S. first-quarter gross domestic product estimates set to be released on Thursday, along with the personal consumption expenditures (PCE) price index report on Friday. Any unexpected increase in inflation could create uncertainty around Fed policies, leading to a decline in gold prices.

Higher interest rates and gold price movement

Higher interest rates raise the opportunity cost of holding non-interest-bearing assets like gold. Despite this, market analysts believe that any declines in gold prices may be limited, as buyers are ready to step in when prices retreat. Tim Waterer, chief market analyst at KCM Trade, mentioned that breaching the $2,368 level is crucial for gold to surpass last week’s highs.

Silver, platinum, and palladium prices

Spot silver saw a modest 0.1% increase, reaching $28.94, while platinum climbed 0.8% to $989.70. Conversely, palladium experienced a slight dip of 0.5%, falling to $943.49.

With uncertainty looming over Fed policies and the impact of inflation data, the gold market remains poised for potential fluctuations in the coming days.

(Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)