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Gold drops as markets await Fed comments


Spot gold was 0.8% lower at $2,037.40 per ounce, and US gold futures dropped 0.5% to $2,041.50

Gold prices declined on Tuesday hurt by a strengthening US dollar and Treasury yields, as markets wait to hear remarks from several Federal Reserve officials this week to further gauge the trajectory of the central bank’s monetary policy.

Spot gold was 0.8% lower at $2,037.40 per ounce. US gold futures dropped 0.5% to $2,041.50, according to news agency Reuters. The dollar index gained 0.8% to a more than one-month peak, making bullion less attractive for holders of other currencies, while yields on the benchmark US 10-year Treasury notes jumped above 4%.

Fed Governor Christopher Waller is scheduled to deliver a speech on the economic outlook at the Brookings Institution, with at least other six officials due to speak this week.

Fed official Waller said the US was “within striking distance” of the Fed’s inflation goal of 2%, but the central bank should not rush towards reductions in its benchmark interest rate until it is clear lower inflation will be sustained.

Fed officials probably will keep a neutral guidance, keeping all options on the table based on incoming data. So to see gold prices edge up, we need to remain on a soft landing path, said UBS analyst Giovanni Staunovo.

The Fed is widely expected to hold its policy rate steady at the end of its January 30-31 meeting. Traders now see a 73% chance of an interest rate reduction in March, according to the CME Fedwatch tool. Lower interest rates raise non-yielding bullion’s appeal.

Elsewhere, ECB officials pushed back against market expectations for rapid rate cuts this year. Spot silver declined 0.9% to $22.99 per ounce, platinum shed 1.4% to $902.22, and palladium slid 1.7% to $954.76, according to Reuters.

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