Gold prices range-bound as investors brace for US inflation data

By Seher Dareen

(Reuters) - Gold prices were stuck in a tight range on Thursday as investors cautiously awaited U.S. inflation data that could offer fresh clues about the pace of the Federal Reserve's monetary policy tightening.

 

Spot gold XAU= held its ground at $1,834.35 per ounce, as of 0647 GMT, trading close to Wednesday's high of $1,835.60. U.S. gold futures GCv1 were steady at $1,835.70.

 

The U.S. consumer price index for January, expected later in the day, is likely to have risen 0.5%, culminating in an annual rise of 7.3%, which would be the largest such increase since 1982, according to a Reuters poll. (Full Story)

 

A robust inflation reading is expected to burnish gold's appeal as an inflation hedge, but interest rate hikes would raise the opportunity cost of holding non-yielding bullion.

 

"I think the dollar is going to weaken off despite yields going higher because every other central bank is raising interest rates ... to defend against inflation," said Stephen Innes, managing partner at SPI Asset Management.

 

"If the Fed starts ramping up rates too quickly, it's not good for the economy, especially with every other central bank doing the same thing in unison. In that sense, gold could actually be a pretty decent hedge over the long term."

 

U.S. and European government bond yields have been rising as expectations of rate increases grow, but benchmark 10-year U.S. Treasury yields US10YT=RR were off their November 2019 highs reached earlier in the week, while the dollar held steady. USD/ US/

 

A tech-fuelled global stocks rally cooled early on Thursday as investors took a more cautious posture amid uncertainties around the outlook for inflation and interest rates. MKTS/GLOB

 

Expected aggressive Fed rate hikes could take some shine off gold from the second quarter, ANZ said in a note.

 

Among other metals, silver XAG= dipped 0.1% to $23.28 per ounce, platinum XPT= was steady at $1,033.32 per ounce, while palladium XPD= rose 0.4% to $2,288.50.

 

 

 

 

(Reporting by Seher Dareen in Bengaluru; Additional reporting by Swati Verma; Editing by Shailesh Kuber and Subhranshu Sahu)