Falling US Fed rate cut bets keep gold below $2,000 level, palladium up 7%

Gold prices extended their dip and traded below the key $2,000-per-ounce level on Wednesday, a day after hotter-than-expected US inflation data prompted investors to lower bets for early Federal Reserve interest rate cuts, while palladium jumped 7%.

Spot gold was down 0.2% to $1,988.08 per ounce as of 9:53 a.m. EST (1453 GMT) - its lowest price since Dec. 13. Bullion fell about 1.4% on Tuesday.

US gold futures slipped 0.3% to $2,000.90/oz.

"Gold is trading lower on the heat of the CPI data. It's going to be hard for gold to rally because part of its rally north of $2,000 was on the expectation of Fed rate cuts coming sooner," said Bob Haberkorn, senior market strategist at RJO Futures.

The catalyst for gold to trend even lower would be more confirmation that the Fed might not be able to cut rates soon, he added.

Data on Tuesday showed US consumer prices rose more than expected in January, at a 3.1% annual rise, above economists' forecast in a Reuters poll for a 2.9% increase.

Traders now see three 25-basis-point rate cuts in 2024, down from four, in line with the Fed's "dot plot" released in December. The US central bank may wait until June before cutting rates.

Higher interest rates increase the opportunity cost of holding bullion.

Investors will now focus on US retail sales and producer price index data due to be released on Thursday and Friday, respectively. At least five Fed officials are due to speak this week.

Spot palladium jumped 6.8% to $922.56 and platinum rose 2.1% to $889.68. Earlier this month, palladium prices had fallen below those of sister metal platinum for the first time since April 2018.

"Physical consumers are likely buying palladium on dips as prices have been trending lower for the last several months," said Daniel Ghali, commodity strategist at TD Securities.

Silver gained 0.2% to $22.13.

A break below current levels could trigger further declines in silver, while a rebound would help solidify technical support at $22, Kinesis Money said in a note.