Gold prices hold still as investors eye US inflation data

Bengaluru — Gold prices traded flat on Wednesday as investors looked forward to a critical US inflation print that could offer clues on the US Federal Reserve’s interest rate cut trajectory.

Spot gold held its ground at $2,359.02/oz, as of 3.14am GMT, trading in a narrow $5 range, after gaining 1% on Tuesday.

US gold futures rose 0.2% to $2,364.60.

The US consumer price index data is due at 12.30pm GMT. According to a Reuters poll, the data is expected to show that core inflation in April rose 0.3% month on month, down from 0.4% the prior month.

Gold is data-dependent at the moment: “If the CPI starts to come down a little bit, it will be positive for gold as it is in a fantastic position to capitalise on that dynamic considering its resilience to this point”, said Kyle Rodda, a financial market analyst at Capital.com.

But, “if CPI comes higher than expected then that's going to really rattle all the markets and the confidence that rates can be cut”.

Last week’s lacklustre jobs report and a softer-than-expected US payrolls report for April have increased expectations for rate reductions by September.

Bullion is known as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold.

US Fed chair Jerome Powell said on Tuesday that he expected US inflation to continue declining throughout 2024 and noted it was unlikely the central bank would have to raise interest rates again.

However, data on Tuesday showed that US producer prices increased more than expected in April.

Spot silver dipped 0.1% to $28.57/oz and palladium gained 1.5% to $992.84/oz. Platinum climbed 2.3% to $1,054.36/oz, hitting a near one-year high.

Australian-listed shares of BHP Group, the world’s largest miner, rose 2.4% after its takeover target Anglo American announced a break-up plan to defend itself against a $43bn offer.

Reuters