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Gold rises on weaker dollar ahead of key U.S. inflation data

Gold gains

Spot gold added 0.2% to $2,033.90 per ounce, and U.S. gold futures gained 0.3% to $2,040.00 per ounce

Gold prices rose on Wednesday, supported by a slightly weaker U.S. dollar ahead of a key inflation reading that could offer some clues on whether the Federal Reserve will begin cutting interest rates this year.

Spot gold added 0.2% to $2,033.90 per ounce, as of 1148 GMT. U.S. gold futures gained 0.3% to $2,040.00 per ounce.

If the CPI figures exceed market expectations, perhaps forcing the Fed to delay its policy pivot, that could force bullion to relinquish more of its gains from the final quarter of last year, said Han Tan, chief market analyst at Exinity Group.

However, further evidence of U.S. disinflation taking hold may propel spot gold near $2,100 in the immediate term, Tan said.

The dollar index dropped nearly 0.1% against a basket of currencies, making bullion more attractive for foreign currency holders.

The focus of investors now switches to Thursday’s U.S. consumer and producer inflation figures, which are expected to show that headline inflation added 0.2% in December and 3.2% year-on-year.

A New York Federal Reserve report revealed that consumers expect a drop in inflation, while Fed Governor Michelle Bowman reversed her long-held hawkish position on Monday, stating that U.S. monetary policy is now “sufficiently restrictive”.

As per the CME FedWatch Tool, the market currently expects around a 68% probability of a rate cut at the Fed’s March 19-20 policy meeting.

Spot silver was stable at $22.96 per ounce.

We are positive about industrial demand. Despite risks of a slowdown or even a mild recession in the U.S., we think the silver market will remain in a deficit for the foreseeable future. Although in the short term prices will be heavily dictated to by institutional trends, said Philip Newman, MD of Metals Focus.

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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