Bengaluru — Gold prices were flat on Tuesday as market participants kept to the sidelines ahead of US inflation data that is expected to shed more light on recovery in the world’s largest economy.

Spot gold was unchanged at $1,731.69 an ounce by 3.54am GMT, with elevated US treasury yields negating support from expectations of higher inflation. US gold futures were also steady at $1,732.80 an ounce.

“Gold is being supported by expectations of higher inflation numbers from the data later in the day,” said Stephen Innes, chief global market strategist at financial services firm Axi.

A survey released on Monday by the Federal Reserve Bank of New York showed US consumers raised their inflation expectations again in March after gradual increases in recent months, and became more positive about the job market.

“It’s hard to imagine that gold will not gain today if the data shows higher inflation, but there is a big chance of it pulling back later this week if retail sales data comes positive on Thursday,” Innes said.

The US economy may see a substantial turnaround this year as a result of accommodative monetary and fiscal policy, but the job market still has a lot of space for growth, Boston Fed president Eric Rosengren said.

Gold, as an inflation hedge, becomes a more attractive investment option when central banks take a dovish stand. However, there is a “disagreement between the market and the Fed”, IG Market analyst Kyle Rodda said.

“Even though several strong voices from the Fed have vowed to tolerate inflation and keep rates down until the economy rebounds to satisfactory levels, the market thinks the central bank will have to taper as early as the beginning of 2022,” Rodda said.

Weighing on gold, US treasury yields ticked higher, increasing the opportunity cost of holding the metal that pays no return. Silver was flat at $24.83 an ounce, while palladium rose 0.2% to $2,680.20 an ounce. Platinum slipped 0.2%, to $1,168.13.



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