By Arundhati Sarkar
(Reuters) – Gold prices, on Wednesday, eased off the one-month peak hit in the previous session, as the dollar edged up, although investors held off on big bets ahead of U.S. inflation data later this week that could steer the Federal Reserve’s rate hike strategy.
Spot gold inched 0.2% lower to $1,708.57 per ounce by 1054 GMT, while U.S. gold futures eased 0.3% to $1,711.50. Bullion prices rose more than 2% to breach the key $1,700 level on Tuesday.
Considering Tuesday’s rally was mostly short-term traders covering short positions on the dollar’s retreat, there’s a natural lack of follow-through as such a move is unlikely to trigger any activity in the physical market, said Julius Baer analyst Carsten Menke.
The dollar index rose 0.3% after dropping to a near two-week low on Tuesday, reducing gold’s appeal for overseas buyers. [USD/]
U.S. consumer price index (CPI) data for October is due Thursday, with economists expecting a deceleration in both the monthly and yearly core inflation to 0.5% and 6.5%, respectively.
As the CPI is the single most important data point at the moment, a softer-than-expected reading will raise hopes of the Fed slowing its monetary tightening trend, which could weigh on the dollar and lift gold, Menke added.
Gold is highly sensitive to rising U.S. interest rates as these increase the opportunity cost of holding it.
“Gold has done well to break through $1,700 an ounce. So, the price holding above that level is a notable achievement considering the continued rate hikes by central banks across the world,” said Rupert Rowling, an analyst at Kinesis Money.
Traders also kept a close tab on COVID-related developments in top bullion consumer China, with the city of Guangzhou grappling with a spike in cases.
Spot silver inched 0.1% lower to $21.31 per ounce, platinum fell 0.4% to $993.72, while palladium was little changed at $1,919.72.
(Reporting by Arundhati Sarkar in Bengaluru; Editing by Elaine Hardcastle and Savio D’Souza)
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