Gold struggled near a two-month low on Thursday, as investors assessed comments from two US Federal Reserve officials on unexpectedly high January inflation that has tempered hopes for swift and deeper interest rate cuts this year.
Spot gold was flat at $1,992.33 per ounce (Oz), as of 0706 GMT, after hitting its lowest since Dec. 13 on Wednesday. U.S. gold futures also remained flat at $2,004.20/Oz.
“After a sharp fall in gold prices (on Wednesday), we see some consolidation. But today’s (economic) data points will give more clarity,” said Ajay Kedia, director at Kedia Commodities in Mumbai.
“The dollar’s move would be important to watch as it may retest its highs, weakening gold prices.”
The U.S. dollar index held its position below a three-month peak. A stronger dollar makes gold more expensive for buyers using other currencies.
Fed Vice Chair for Supervision Michael Barr backed the “careful approach” to rate cuts advocated by Chair Jerome Powell, while Chicago Fed President Austan Goolsbee cautioned against delaying action for too long.
The comments followed an unexpected increase in U.S. consumer prices, which prompted bullion to drop 1.4% on Tuesday, marking its biggest daily decline since Dec. 4.
Traders are now pricing in 97 basis points (bps) of rate cuts for this year, an increase from about 85 bps early on Wednesday but a decline from over 110 bps prior to the inflation data.
The first cut will likely occur in June.
In the near term, spot gold could fall towards the $1,950 level, “which should be a good zone to take a long position”, said Kedia.
Focus is now on the U.S. retail sales data due at 1330 GMT and the producer price index numbers due on Friday. At least three more Fed officials are scheduled to speak later this week.
Among other precious metals, palladium edged down 0.1% to $933.83/Oz. It surged over 8% on Wednesday on short-covering, reclaiming its premium over platinum.
Spot platinum rose 0.2% to $891.21/Oz and silver rose 0.4% to $22.46.
