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Gold jumps on weaker dollar ahead of U.S. inflation report

Gold prices drop

Spot gold was 0.4% higher at $2,031.30 per ounce, and U.S. gold futures also added 0.4% to $2,035.40

Gold eked out gains on Thursday as the U.S. dollar extended its decline ahead of a U.S. inflation report later in the day that could offer more clarity on the Fed’s monetary policy outlook this year.

Spot gold was 0.4% higher at $2,031.30 per ounce, as of 0448 GMT. U.S. gold futures also added 0.4% to $2,035.40.

The dollar index lost 0.1%, on its second session of decline, making bullion more attractive for buyers holding other currencies.

U.S. consumer price inflation looming, gold bears may be taking a cautious approach and lightening their load ahead of the event, said Matt Simpson, a senior analyst at City Index.

All eyes are on U.S. consumer price inflation report due at 1330 GMT, followed by producer prices data on Friday.

Traders are betting on 140 basis points  of interest rate reductions by the U.S. central bank this year and a 69% probability they begin as soon as March, as per LSEG’s interest rate probability app, IRPR.

While Fed cuts seem likely, 140 basis points could still be overly optimistic in my view. Core consumer price inflation is still roughly twice the Fed’s target and employment data remains strong, Simpson added.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Earlier this week, a New York Fed report said consumers expect a drop in inflation while Fed Governor Michelle Bowman stated that the U.S. central bank’s monetary policy seems “sufficiently restrictive”.

Spot gold may break support of $2,023 per ounce and drop into the $2,006-$2,016 range, according to Reuters technical analyst Wang Tao.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Precise Investors. The information provided on Precise Investors is intended for informational purposes only. Precise Investors is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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