Gold ticks up as US inflation data fuels bets for rate-hike pause

13 Apr, 2023

Gold prices inched higher for a third consecutive session on Thursday, as cooler-than-expected US inflation data spurred bets that the Federal Reserve might raise rates once more next month before pausing hikes.

Spot gold was up 0.1% at $2,016.99 per ounce, as of 0332 GMT.

US gold futures rose 0.3% to $2,030.70.

Gold prices rose more than 1% on Wednesday after data showed the US Consumer Price Index (CPI) rose 0.1% last month, compared with expectations for a 0.2% increase, after advancing 0.4% in February.

“Expectations that the Fed’s hiking cycle may be nearing its end are well-anchored by the recent US CPI data, with lower Treasury yields and a weaker dollar being supportive of gold prices,” said Yeap Jun Rong, a market analyst at IG.

The CME FedWatch tool shows markets are pricing in a 68.7% chance of a 25 basis-point hike in May, with rate cuts seen in the back half of the year. Gold is considered an inflation hedge, but rising interest rates reduce the appeal of non-yielding bullion.

San Francisco Fed Bank President Mary Daly said on Wednesday while the US central bank had “more work to do” on rate hikes, tighter credit conditions could argue for a pause.

Richmond Fed President Thomas Barkin said the Fed had more work to do in bringing inflation down to its 2% target because the latest data on price pressures was not sufficiently weak.

Minutes from the Fed’s March meeting also showed several policymakers considered pausing rate increases after a forecast that banking sector stress would tip the economy into recession, but concluded that high inflation remained the priority.

Gold, silver at new highs

Recession concerns are “allowing gold prices to ride on its safe-haven status while technical conditions are revealing some moderation in upward momentum on recent highs,” IG’s Yeap added.

Spot silver was up 0.1% at $25.50 per ounce, platinum was flat at $1,015.06 and palladium rose 0.3% to $1,464.16.

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