Gold prices showed resilience on Wednesday, remaining above a two-week low reached in the previous session, as the market awaited U.S. inflation data. This data is expected to provide insights into whether the Federal Reserve will opt for further interest rate hikes and for how long.
Spot gold slipped marginally by 0.1% to $1,910.87 per ounce by 0514 GMT, after touching its lowest level since August 25 at $1,906.50 on Tuesday. U.S. gold futures also declined by 0.1% to $1,933.30.
Investors are closely monitoring the release of the U.S. Consumer Price Index (CPI) data, scheduled for 1230 GMT. With energy prices on the rise, there are expectations for stronger headline inflation figures.
Kelvin Wong, Senior Market Analyst, Asia Pacific, at OANDA, noted, “If inflationary data for the U.S. comes in much hotter-than-expected, the U.S. 10-year Treasury yield is likely to inch higher and put a damper on gold.”
Benchmark 10-year bond yields saw a 0.2% increase, with expectations that interest rates will remain elevated for an extended period, thereby supporting the U.S. dollar and capping gold’s upward potential.
While the Federal Reserve is anticipated to leave rates unchanged at its upcoming policy meeting scheduled for September 19-20, economists in a Reuters poll suggest that the central bank will likely hold off on any rate cuts until the period between April and June 2024 or later.
Gold is highly sensitive to rising interest rates, as they raise the opportunity cost of holding non-yielding bullion.
In addition to the U.S., the European Central Bank also anticipates inflation to remain above 3% in the coming year, further strengthening the case for a tenth consecutive rate hike on Thursday, according to an inside source.
Technical analyst Wang Tao at Reuters suggests that spot gold may retest a support level at $1,905 per ounce, with a considerable chance of breaking below this threshold and declining towards $1,898.
In other precious metals, spot silver fell by 0.8% to $22.92 per ounce, platinum declined by 0.5% to $905.49, and palladium dropped by 0.8% to $1,230.44.
