Spot gold slipped 0.2% to $4,164.45 per ounce by 0201 GMT on Tuesday. The U.S. dollar held firm as investors awaited inflation reports that could shape expectations for Federal Reserve interest rates. December U.S. gold futures also fell, down 0.1% to $4,187.90. The decline followed spot gold’s one-week peak on Monday.
The dollar stayed near an 18-month high reached in the previous session. Gold is priced in dollars, so a stronger dollar makes the metal costlier for buyers using other currencies. Uncertainty over U.S. inflation and the possible direction of interest rates added pressure.
Inflation data in focus
The U.S. Consumer Price Index report is due Wednesday, with the Producer Price Index report scheduled for Thursday. Investors are watching the figures for signs of what the Federal Reserve might do next. “US CPI data will be critical for gold in the short-term,” said Kyle Rodda, senior financial market analyst at Capital.com.
Rodda said hotter-than-expected inflation, especially in the core measure, could lift expectations of an October rate hike, even modestly, and push gold down again. Traders now see a 21% chance of a rate increase this month and price in an 88% chance of a December increase, according to CME’s FedWatch tool.
Higher interest rates can make assets that pay yields more attractive than gold, which pays no interest. The prospect of tighter policy has kept markets focused on the inflation releases. The reports will give investors fresh data to assess, but their effect on Federal Reserve decisions remains uncertain.
Fed comments and market positioning
Cleveland Fed President Beth Hammack said the U.S. central bank should move “relatively quickly” toward a more restrictive monetary policy stance to control inflation. She said inflation had spread more broadly and was beginning to shape firms’ price-setting plans.
Investors took a wait-and-see stance in early Asian trade, with U.S. bank earnings and the week’s inflation data ahead, Peter A. Grant, vice president and senior metals strategist at Zaner Metals, said in a note. Grant said the CPI report would offer clues about the Federal Reserve’s next interest-rate move. Markets will also weigh other U.S. economic data and comments from a heavy slate of Federal Reserve speakers as they judge the likelihood of further rate increases that year.
Spot gold stood 0.2% lower at $4,163.71 an ounce at 0017 GMT, according to the report’s early Asian trading update. That price and the later $4,164.45 figure come from separate reported times. December delivery futures were quoted at $4,187.90, down 0.1%.
Other markets and regional security
Saudi Arabia said it faced a new barrage of incoming fire and that Riyadh airport would remain shut for now. The statement followed Saturday’s deadly missile strike on a departure terminal, which Yemen’s Iran-allied Houthis claimed.
Other precious metals fell too. Spot silver eased 0.5% to $60.01, platinum dropped 0.2% to $1,682.47 and palladium slipped 0.5% to $1,137.69. Ashitha Shivaprasad reported for Reuters in Bengaluru, and Rashmi Aich edited the report.