LONDON: Gold prices eased on Monday, as investors assessed the Federal Reserve’s possible response to high inflation expectations, but a pullback in US bond yields capped losses.
Spot gold fell 0.1% to $1,862.51 per ounce by 1052 GMT, while US gold futures dipped 0.2% to $1,865.00.
Gold was again facing some resistance around $1,870, Saxo Bank analyst Ole Hansen said, adding that if gold failed to build on recent gains soon “some profit taking could come into the market.”
Bullion climbed to a nearly five-month high last week as US consumer prices posted their sharpest annual jump in 31 years, forcing investors to bring forward their rate hike expectations.
“Since the initial CPI shock, the market has actually steadily been reducing some of the (rate hike) expectations for 2022, and that’s also just in the short term at least, providing some support to gold,” Hansen said.
US benchmark 10-year Treasury yields pulled back, reducing non-yielding bullion’s opportunity cost.
Minneapolis Federal Reserve Bank President Neel Kashkari said on Sunday he expected higher inflation in the next few months but said the US central bank should not overreact to elevated inflation as it was likely to be temporary.
Warren Patterson, head of commodities strategy at ING, said: “Inflation numbers have provided a boost to gold. However, prices could trend lower towards $1,700 over the course of 2022 as rising inflation will likely mean that central banks speed up the pace of monetary tightening.”
Interest rate hikes tend to reduce non-interest bearing gold’s appeal as it raises the metal’s opportunity cost.
Elsewhere, spot silver fell 0.3% to $25.20 per ounce.
UBS analysts saw a weaker silver price with the Federal Reserve’s policy normalisation, along with higher interest rates, and inflation pressure likely fading in 2022. Platinum dropped 0.7% to $1,075.15, palladium slipped 0.7% to $2,095.15.