Gold prices experienced a slight downturn on Tuesday, with investors eagerly anticipating crucial U.S. inflation data that could offer insights into the timing of potential interest rate adjustments by the Federal Reserve.
At 0732 GMT, spot gold declined by 0.3% to $2,342.80 per ounce, following a previous day’s increase of approximately 1%.
Meanwhile, U.S. gold futures saw a 0.4% uptick, reaching $2,343.80.
Kelvin Wong, a senior market analyst for Asia Pacific at OANDA, remarked, “A very strong dollar picture supported by a change in the U.S. monetary policy stance where the Fed starts looking for evidence to kick start interest rate hikes instead of easing could be a major risk as we could see a further corrective move in spot gold.” He emphasized that in the short term, spot gold remained slightly skewed towards the positive side, with $2,310 serving as a pivotal short-term support level for the week.
The core personal consumption expenditures price index (PCE), regarded as the Fed’s preferred inflation gauge, is scheduled for release on Friday.
Last week’s release of Fed meeting minutes indicated that the current policy response entails maintaining the benchmark policy rate at its existing level. However, discussions also reflected potential considerations for further hikes.
Traders are currently pricing in about a 63% chance of a rate cut by November, according to the CME FedWatch Tool.
Gold is traditionally considered an inflation hedge, yet higher rates elevate the opportunity cost of holding non-yielding gold.
Reuters technical analyst Wang Tao suggested that spot gold might breach the nearest resistance at $2,357 per ounce, potentially ascending towards the $2,363-$2,373 range.
In related news, Vietnam’s central bank announced its decision to cease auctioning gold in the domestic market, opting instead for a new measure aimed at stabilizing domestic prices, as revealed on Monday.
Spot silver experienced a 0.8% decline to $31.42, while platinum dropped by 0.7% to $1,047.20, and palladium slid by 0.7% to $982.24.