Gold is off to its best start in six years but prices are expected to fall. Picture: BLOOMBERG
Gold is off to its best start in six years but prices are expected to fall. Picture: BLOOMBERG

London — Gold slipped on Tuesday, pressured by a firmer dollar and concern that US inflation data later in the day will be robust, strengthening the case for more US interest rate hikes. Analysts polled by Reuters forecast the US consumer price index (CPI), due at 12.30pm GMT, rose 2.2% in February year on year, compared with a 2.1% increase a month earlier.

"If you have a higher than expected CPI reading today it would put more downward pressure on gold, especially if yields also go up," said Georgette Boele, commodity strategist at ABN AMRO in Amsterdam. "Overall, the outlook is not looking that great in the short term. I still expect prices to go towards $1,300."

Spot gold was down 0.3% at $1,318.35 an ounce by 10.22am GMT, while US gold futures for April delivery fell 0.2% to $1,318.70 an ounce.

The dollar index was up 0.17% at 90.047, while the dollar jumped to a two-week high against the yen. A higher US CPI reading could stoke expectations that the Federal Reserve will likely raise interest rates four times, rather than three times, this year. Higher interest rates increase the opportunity cost of holding non-yielding bullion.

"Gold traders are adopting a more neutral stance ... While a March hike is fully priced in, traders usually get a bit anxious awaiting the Fed statement and key forward guidance," said Stephen Innes, Asia Pacirifc trading head at Oanda. "We should expect interest rate uncertainty to weigh on prices over the short term."

Spot gold looks neutral in a range of $1,318 to $1,327 an ounce and an escape could suggest a direction, according to Reuters Technical analyst Wang Tao.

In other precious metals, silver rose 0.1% to $16.50 an ounce. Net long positions in US silver futures increased for the first time since January, UBS analyst Joni Teves said in a note. "Silver has been such an under-performer of late and one of the few positive factors currently is that net length is very lean. Despite recent gains, net speculative positions in silver are still only 18% of the record."

Platinum fell 0.5% to $957.50 an ounce, while palladium was unchanged at $978.50 an ounce.