Gold prices hold steady ahead of US inflation data

Bengaluru — Gold prices flitted in a narrow range on Tuesday ahead of US inflation data, which investors will scrutinise for clues on the Federal Reserve’s policy path.

Spot gold was little changed at $2,023.41 an ounce at 2.32am GMT. US gold futures were down 0.2% at $2,030.10.

The US consumer price index (CPI) data is due on Wednesday. If the inflation report comes hot and fans worries of another Fed rate hike in June, gold prices could eventually drop to $1,950-$1,920 level, Kedia Commodities director Ajay Kedia said.

Bullion is considered an inflation hedge, but higher rates dent the non-yielding asset’s appeal. However, traders are pricing in a 92% chance of the US central bank holding rates at their current level in June.

US consumers’ inflation expectations were mixed in April, the New York Federal Reserve’s report showed. Besides economic data, market participants are also monitoring developments surrounding the US banking sector and debt ceiling. Fed survey data released on Monday showed in the latest indication that higher central bank interest rates were starting to bite in the finance sector.

“If there is news of further stress in the banking sector, we will see gold move towards the $2,100 level,” Kedia said.

Treasury secretary Janet Yellen said on Monday that a failure by Congress to raise the $31.4-trillion federal debt limit would cause a huge hit to the US economy and weaken the dollar as the world’s reserve currency.

Spot silver added 0.2% at $25.61 an ounce. Platinum rose 0.2% to $1,073.23, while palladium fell 0.3% at $1,548.58.

Though platinum prices might see a short-term correction, overall price risk was to the upside, Heraeus analysts said in a note. “With automotive demand showing strength, the risk of supply underperformance underpins a tight market throughout this year.”

Reuters