Gold prices dipped to their lowest level in over two weeks on Tuesday as the U.S. dollar made gains, while investors positioned themselves for the release of U.S. inflation data scheduled for Wednesday.
Spot gold declined by 0.5% to reach $1,912.39 per ounce by 1:50 p.m. EDT (1750 GMT), marking its lowest level since August 25. Meanwhile, U.S. gold futures settled 0.6% lower at $1,935.10.
Bob Haberkorn, Senior Market Strategist at RJO Futures, noted that investors are exiting the gold market and waiting for the upcoming data release. They may seek to buy gold at lower prices because there is still some safety buying in the precious metal.
The dollar index gained 0.2%, making gold more expensive for holders of other currencies, ahead of the U.S. consumer price index data due on Wednesday. The CPI figures could potentially influence the Federal Reserve’s interest rate decision.
Headline U.S. inflation is expected to have risen by 0.6% in August, according to a Reuters poll, compared to a 0.2% increase in the previous month. However, overall views on inflation among Americans remained relatively stable in August, as reported by the New York Fed on Monday.
Higher interest rates tend to dull the appeal of non-yielding gold, and traders are currently pricing in a roughly 47% probability of a rate hike in November after an expected pause by the Fed next week, according to the CME FedWatch tool.
Lukman Otunuga, Senior Research Analyst at FXTM, suggested that if inflation figures surpass market forecasts, gold prices may depreciate as expectations increase regarding the Fed’s potential to raise rates once this year.
Traders are also keeping an eye on the European Central Bank’s rate decision scheduled for Thursday. ECB euro short-term rate (ESTR) forwards indicate a slightly greater than 50% chance of a rate hike at this week’s policy meeting.
Harshal Barot, Senior Consultant at Metals Focus, noted that Europe’s economy is facing significant challenges, which could lead to safe-haven demand for gold if investors perceive that the currency is under pressure.
In other precious metals, silver remained flat at $23.07 per ounce, platinum rose by 1.4% to $910.82, and palladium gained 1.5% to $1,236.17.
