Gold prices edged lower on Wednesday as caution prevailed ahead of the US consumer price inflation report that could provide more clarity on the Federal Reserve’s interest rate trajectory.
Spot gold eased 0.1% to $2,672.76 per ounce by 0300 GMT.
US gold futures gained 0.3% to $2,689.70.
“If the CPI data comes higher, that might send gold lower because that kind of solidifies the view that the Fed more likely will be normalising last year’s dovish policy in 2025,” said Kelvin Wong, OANDA’s senior market analyst for Asia Pacific.
The data, due at 1330 GMT, will be closely watched by market participants after last week’s blowout jobs report underlined the strength of the US economy and led traders to heavily pare back bets of further Fed easing.
A Reuters poll forecast an annual rise of 2.9% versus 2.7% in November 2024 and a monthly increase of 0.3%.
Gold extended gains on Tuesday after data showed that the producer price index rose on an annual basis in December, slightly raising hopes that the Fed would continue rate cuts this year.
Meanwhile, traders have fully priced in a pause in rate cut at the Fed’s January policy meeting.
With President-elect Donald Trump set to begin his second term next week, the focus remains on his policies that analysts expect will fuel inflation.
Non-yielding bullion is used as a hedge against inflation, although higher interest rates diminish its appeal.
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“If gold prices were to dip further to break out of the November range down below $2,600, the next key level will be around $2,540 and I believe that could be an attractive level for long-term holders to consider,” Wong said.
According to Reuters technical analyst Wang Tao, spot gold may fall towards $2,635.
Spot silver shed 0.3% to $29.81 per ounce and palladium dropped 0.3% to $935.89. Platinum steadied at $935.92.
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