Gold rises as market watches for inflation data

Gold prices firmed on Wednesday as the dollar weakened, with investors awaiting the US Federal Reserve’s latest policy meeting minutes and inflation data for signs of how close interest rates are to peaking.

Spot gold rose 0.3% to $2,008.11 per ounce by 1210 GMT while U.S. gold futures were up 0.2% to $2,023.10.

U.S. consumer price index (CPI) data is due at 1230 GMT and the Fed’s minutes of the March meeting at 1800 GMT.

“The Fed minutes will be closely scrutinised for key insight into how policymakers evaluated the need for higher rates despite the turmoil in the banking sector,” said Lukman Otunuga, senior research analyst at FXTM.

The IMF said lingering financial system vulnerabilities could erupt into a new crisis, but urged member countries to keep tightening monetary policy to fight inflation.

Gold meanwhile drew strength as the dollar slipped, making gold cheaper for holders of other currencies, while benchmark U.S. yields were close to their highest in a week, limiting gold’s gains.

Euro zone markets see two 25-basis point moves as priced in, while investors are split over a third hike as the European Central Bank focuses on reducing price pressures.

Commentary from ECB Vice President Luis de Guindos will also be closely monitored on Wednesday.

Philadelphia Fed Bank President Patrick Harker on Tuesday said he feels the Fed may finish raising rates once they exceed 5%.

While gold is seen as a hedge against inflation, higher rates to bring down prices tend to weigh on non-yielding gold’s appeal.

Analysts at Intensa SanPaolo said they expected gold to be well supported in the coming months given strong demand across all the main consuming sectors, seeing prices averaging $1,890 in the second quarter of the year.

Spot silver rose 0.1% to $25.11 per ounce, platinum jumped 1.2% to $1,006.60 while palladium rose 0.2% to $1,449.41.