NEW YORK: Gold prices firmed on Wednesday as the US dollar and Treasury yields retreated, while market participants awaited US inflation data for clues on the Federal Reserve’s interest rate strategy.
Spot gold gained 0.4% to $2,687.59 per ounce by 1107 GMT. US gold futures were up more than 1% at $2,710.00. The dollar index eased 0.2%, making bullion more attractive for other currency holders. The benchmark 10-year Treasury yields also slipped.
The US Consumer Price Index (CPI) data is due at 1330 GMT. A Reuters poll forecast month-on-month inflation held at 0.3% in December, while the year-on-year figure climbed to 2.9% from 2.7% in November. The market is on hold, waiting for the CPI data to see its impact on rate cuts, while the upcoming inauguration of Donald Trump as president adds to market uncertainty, which is providing gold some support, said Ole Hansen, head of commodity strategy at Saxo Bank. If CPI data is unexpectedly low, it could “convince the market that we are still on a path to rate cuts”, with the market pricing just between nothing and one cut this year, he said.
Data on Tuesday showed US producer prices rose moderately in December, but that is unlikely to change views that the country’s central bank would not cut rates again before the second half of this year amid labour market resilience.
Investors are anxious about the vow of Trump, who is set to begin his second term next week, to impose tariffs on a wide range of imports, fearing they could fuel inflation and further limit the Fed’s ability to lower rates.
Non-yielding bullion is used as a hedge against inflation, although higher interest rates diminish its appeal. Spot silver firmed 0.6% at $30.07 per ounce and platinum rose 0.5% to $939.50. Palladium added 1.3% at $950.89.
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