By Anjana Anil
(Reuters) – Gold prices extended gains on Wednesday, supported by a weaker U.S. dollar and bond yields after data showing slowing U.S. inflation bolstered the view that the Federal Reserve is done with its rate-hike campaign.
Spot gold was up 0.3% at $1,969.20 per ounce, as of 0745 GMT, after rising nearly 1% overnight. U.S. gold futures gained 0.4% to $1,973.40.
“Near-term, we may still need to see a move in gold prices above yesterday’s high at the $1,970 level to potentially pave the way to retest the psychological $2,000 level next,” IG market strategist Yeap Jun Rong said.
Data on Tuesday showed U.S. consumer prices were unchanged in October and the annual rise in underlying inflation was the smallest in two years.
Softer-than-expected inflation print sent the dollar index to a more than two-month low, making gold less expensive for other currency holders. Benchmark U.S. 10-year Treasury yields slid to a near two-month low. [USD/] [US/]
U.S. rate futures on Tuesday priced in a 65% chance of a rate cut in May next year, compared with 34% late on Monday, according to the CME’s FedWatch tool.
Despite a very sharp decline in the dollar and yields, gold could not capitalise more and had a fairly modest increase, suggesting that there’s still some unwinding in the geopolitical risk element on the Israel-Hamas conflict, said Ilya Spivak, head of global macro at Tastylive.
Lower U.S. interest rates raise the appeal of holding gold.
Investors now wait for U.S. retail sales data and producer price index (PPI) on Wednesday for more cues on the Fed’s interest rate outlook. Economists are forecasting a 0.1% gain in PPI last month, compared with a 0.5% increase in September.
Spot silver rose 0.8% to $23.26 per ounce, while platinum eased 0.2% to $883.26. Palladium was steady at $1,016.24 per ounce.
(Reporting by Brijesh Patel in Bengaluru; Editing by Rashmi Aich, Janane Venkatraman, Sherry Jacob-Phillips and Sohini Goswami)
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