LONDON: Gold edged lower on Wednesday as the dollar and US Treasury yields gained in the run-up to the last inflation reading before this month’s Federal Reserve policy meeting.
Spot gold fell 0.1% to $1,850.50 per ounce by 1155 GMT, holding a relatively tight range, while US gold futures were little changed at $1,853.40.
“The sentiment is quite confused and that is leading to this sideways trading,” said Saxo Bank analyst Ole Hansen, adding gold needs to break above $1,870 for some fresh momentum.
“Both the yield and dollar developments are not favourable (for gold)... but against that, we’ve got the World Bank downgrade of global growth ringing in the ears.”
The World Bank on Tuesday slashed its 2022 growth forecast by nearly a third and warned of rising risk of stagflation, providing some support to safe-haven gold.
Meanwhile, US consumer price data on Friday could provide clues on whether the Fed will continue with its aggressive policy stance.
Expectations that the Fed would raise interest rates at its meeting this month helped the dollar index rise 0.2% and kept 10-year US Treasury yields near the key 3% level.
While gold is considered a hedge against inflation and political and economic uncertainties, higher interest rates increase the opportunity cost of holding the non-yielding asset.
Consumers and businesses are being squeezed by higher inflation and rising interest rates, casting uncertainty over the economic outlook, said Clifford Bennett, chief economist at ACY Securities.
“It may prove very rewarding over the next 1-2 years to be invested in gold,” he added.
But on the physical front, consultants Metals Focus said that gold demand will dip this year amid weaker jewellery sales and retail investment in China due to COVID-19 lockdowns and an economic slowdown.
Elsewhere, silver fell 0.9% to $22.00 per ounce, platinum dipped 0.5% to $1,005.89 and palladium shed 0.9% to $1,965.31.
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