Gold prices held near a two-month low on Thursday, as traders assessed US Federal Reserve officials’ mixed remarks on January’s hotter-than-expected inflation data that triggered a pull back on hopes of early and deeper interest rate cuts.

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Fundamentals

• Spot gold was flat at $1,992.77 per ounce (Oz), as of 0157 GMT, after hitting its lowest since Dec. 13 on Wednesday.

• US gold futures were also flat at $2,004.60/Oz.

• The Fed’s path back to its 2% inflation target rate would still be on track even if price increases run a bit hotter-than-expected over the next few months, and the central bank should be wary of waiting too long before it cuts interest rates, Chicago Fed President Austan Goolsbee said on Wednesday.

• Goolsbee’s remarks came after an upside surprise in US inflation on Tuesday showed the consumer price index (CPI) rose 3.1% on an annual basis, above forecasts for a 2.9% increase.

• Bullion slid about 1.4% after the CPI data, in its biggest daily decline since Dec. 4.

• Fed Vice Chair for Supervision Michael Barr said the Fed remained confident, but the January CPI numbers shows the United States’ path back to 2% inflation “may be a bumpy one.”

• Traders are pricing in roughly 97 basis points (bps) of rate cuts for this year, up from about 85 bps early on Wednesday, with the first likely arriving in June now. Fed’s “dot plot” released in December projected three quarter-point rate cuts in 2024.

• Focus is now on US retail sales data due at 1330 GMT and producer price index (PPI) numbers due on Friday. At least 3 Fed officials are due to speak for the week.

• Spot platinum fell 0.3% to $886.46/Oz, palladium dropped 0.5% to $929.72, and silver slipped 0.1% to $22.35.