Gold stalls as investors await US inflation data

Gold is considered a hedge against inflation, but rising interest rates increase the opportunity cost of holding the asset. PHOTO: REUTERS

BENGALURU - Gold prices were listless on Tuesday, with cautious investors on the sidelines as they awaited key US inflation figures due this week that could influence the Federal Reserve’s rate hike narrative.

Spot gold was down 0.1 per cent at US$1,673.60 per ounce as at 0250 GMT. Prices hit a three-week peak in the previous session, buoyed by a weaker dollar.

US gold futures fell 0.3 per cent to US$1,674.90.

The dollar index ticked 0.1 per cent higher, making greenback-priced bullion more expensive for overseas buyers.

While gold managed to close near its three-week high on Monday, it has hit resistance around US$1,680, potentially spurring some wait-and-see for a greater catalyst to induce an upward break, said IG market strategist Yeap Jun Rong.

The US consumer price index report due on Thursday will likely provide cues on the Fed’s strategy.

“A higher-than-expected inflation reading could fan fears of more aggressive rate hikes, which will provide a negative backdrop for non-yielding gold,” Mr Yeap added.

Gold is considered a hedge against inflation, but rising interest rates increase the opportunity cost of holding the asset.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell to 905.48 tonnes on Monday, their lowest level since early 2020.

Investors’ focus is also on the US midterm elections, which will determine control of Congress and could spur moves all over the market.

“Outflows from gold ETFs are weighing on gold... This in conjunction with persistently high inflation and US midterm elections should see gold under pressure leading into Thursday,” said Mr Michael Langford, director at corporate advisory firm AirGuide.

“The US midterm elections are more likely to see investors repositioning towards higher-risk asset classes and reduce exposure to gold.”

Spot silver was down 0.5 per cent at US$20.68. Platinum fell 0.1 per cent to US$977.90, and palladium also slipped 0.1 per cent to US$1,894.32. REUTERS

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