By Harshit Verma
(Reuters) – Gold prices edged lower on Tuesday reflecting an uptick in the U.S. dollar as investors positioned ahead of a crucial U.S. inflation report and the Federal Reserve’s interest rate forecasts.
Spot gold was down 0.2% at $2,305.41 per ounce, as of 0910 GMT. U.S. gold futures fell 0.2% to $2,321.90.
“Gold is edging lower, testing support at the psychological $2,300 line, in yet another display of the precious metal’s inverse relationship with the U.S. dollar that’s moving higher,” Han Tan, chief market analyst at Exinity Group said.
Lowering gold’s appeal by making it more expensive for other currency holders, the dollar rose 0.1%, with the market’s focus now at the May consumer price index (CPI) inflation report due on Wednesday and the Fed concluding its two-day meeting on the same day. [USD/]
“Spot gold would likely be forced back into sub-$2,300 domain if we get higher-than-expected CPI prints that pushes the Fed rate cuts further out. Gold may then be forced another leg lower if the Fed’s dot plot shows just one or no rate cuts at all this year,” Tan said.
Economic projections from Fed officials this week are expected to show fewer interest rate cuts than policymakers anticipated three months ago amid unexpectedly sturdy inflation.
High interest rates make bullion less appealing against yielding assets such as bonds.
Strong U.S. jobs data and news that China’s central bank held off gold purchases sent gold prices tumbling about 3.5%, or $83, on Friday in its biggest daily drop since November 2020.
China, the biggest state buyer of gold, is expected to resume its bullion shopping spree once prices ease from the record highs hit in May, industry players said.
Among other metals, spot silver fell 2% to $29.18 per ounce, platinum was down 0.8% at $960.15 and palladium lost 1.5% to $890.75.
(Reporting by Harshit Verma in Bengaluru; Editing by Mrigank Dhaniwala)
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