Gold prices rose on Tuesday after plunging more than 1 percent to the prior day, as the dollar dropped ahead of important inflation data from the United States (US). As of 0115 GMT, spot gold was up 0.4 percent at 1,995.74 dollar per ounce. Futures for United states gold increased 0.6 percent to 2,008.52 dollar.
With the dollar index down 0.1 percent, foreign purchasers can now purchase bullion at a reduced price.
Investors were now anticipating the release of United States consumer pricing statistics on Wednesday in order to gain additional insight into the trajectory of interest rates ahead of the Fed’s policy meeting in May.
According to OCBC FX strategist Christopher Wong, “a hotter-than-expected data may signal that the Federal Reserve could still boost rates in May. Gold move’s higher has been somewhat excessive possibilities of another Federal Reserve that could raise & bring the overshoot down.”
A tightening labour market was highlighted by a United States employment data released on Friday. Which increased expectations of an interest rate increase by the United States central bank the following month. According to the CME Federal Reserve Watch tool, markets are pricing a 70 percent chance of a 25 bps hike.
As interest rates are increased to reduce inflation, it becomes more costly to retain non-yielding bullion.
On Wednesday, the Federal Reserve will also scan the minutes from its policy meeting held on Mar 21–22.
A correction move lower in gold prices is possible in the near future, according to OCBC’s Wong.
Highest bullion consumer was revealed by data on Tuesday.
Consumer inflation in China fell to its lowest level since Sept 2021 in March, suggesting that demand weakness persisted despite the country’s sluggish economic recovery.
Spot silver increased by 0.3 percent to 25 dollar per ounce.