Gold holds ground as investors brace for US inflation data

London, May 9 (BNA): Gold prices fell in a narrow range on Tuesday ahead of US inflation data, which investors will scrutinize for clues to the Federal Reserve’s policy path.

Spot gold was up 0.3% at $2,027.08 an ounce as of 0520 GMT. Prices have been trading in a narrow range of around $8.

Reuters reported that US gold futures were unchanged at $2,033.90.

US Consumer Price Index (CPI) data is due on Wednesday.

Ajay Kedia, director of Mumbai-based Kedia Commodities, said that if the inflation report comes out hot and fans fear another Fed rate hike in June, gold prices could eventually drop to a level between $1,950 and $1,920.

Bullion is a hedge against inflation, but higher rates have affected the attractiveness of non-yielding assets.

However, traders are currently pricing in a 92% chance that the US central bank will hold interest rates at their current level in June.

A New York Federal Reserve report showed that inflation expectations for US consumers were mixed in April.

Besides economic data, market participants are also watching developments surrounding the country’s banking sector and its debt ceiling.

The Fed’s survey data on Monday showed the latest sign that higher interest rates are starting to take their toll on the financing sector.

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

Treasury Secretary Janet Yellen said on Monday that Congress’ failure to raise the $31.4 trillion federal debt limit would deal a massive blow to the US economy and weaken the dollar as the world’s reserve currency.

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Spot silver rose 0.3% to $25.65 an ounce.

Platinum rose 0.4% to $1,074.55, while palladium fell 0.1%, to $1,552.32.

Analysts at Heraeus Precious Metals said in a note that although platinum prices may see a correction in the short term, the overall price risks are to the upside.

“With auto demand showing strength, the risk of weak supply supports a tight market throughout this year.”

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