NEW YORK: Gold prices steadied on Tuesday after hitting a more than two-month high earlier in the session, as investors awaited US inflation data for clues on the Federal Reserve’s interest-rate path. Spot gold was little changed at USD4,386.13 per ounce by 1135 GMT, after hitting its highest level since June 5 earlier at USD4,434.84. US gold futures rose 0.6percent to USD4,444.70.
Yields on the benchmark 10-year US Treasury note rose to an over one-week high, increasing the opportunity cost of holding bullion. “The upcoming inflation data will significantly influence the outlook for US interest rates.
A hotter-than-expected inflation print could justify the case for an interest rate hike at the Fed’s next meeting and, as a result, put further downward pressure on gold prices,” said Hamad Hussain, a climate and commodities economist at Capital Economics.
Investors are awaiting US consumer price data due on Wednesday and producer price data on Thursday for further clues on the Fed’s policy outlook. Traders are currently pricing a 48percent chance of an interest-rate hike in September, up from 44percent on Monday, according to the CME FedWatch Tool.
Cleveland Federal Reserve Bank President Beth Hammack said on Monday she believed the time was right to begin raising interest rates gradually so as to avoid the need for sharper increases later.
While gold is seen as a hedge against inflation, it loses its appeal as a non-yielding asset in a high-interest-rate environment.
US President Donald Trump responded to Iran’s conditions for a peace deal by demanding that Tehran pay compensation for people killed in wars, attacks and protests. The comments added to uncertainty over efforts to reopen the Strait of Hormuz.
“The precious-metals outlook is showing signs of improving, not least underpinned by ongoing structural demand that helped prevent a deeper correction, while the macro environment has become more supportive and Western investors are showing tentative signs of returning,” Saxo Bank analyst Ole Hansen said in a note.
Among other metals, spot silver fell 0.8percent to USD65.20, platinum gained 1.1percent to USD1,772.05 and palladium declined 0.3percent to USD1,379.08.
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