Gold drops as traders eyes US CPI data for Fed cues

Gold prices slipped on Monday as the dollar edged up as investors looked toward U.S. inflation data that could offer insight into the Federal Reserve’s interest rate cut plans.

Spot gold was down 0.5% to $2,014.70 per ounce at 9:28 a.m. ET (1428 GMT). U.S. gold futures also fell 0.5% to $2,028.60 per ounce.

The dollar index was up 0.1%, making greenback-priced bullion more expensive for overseas buyers.

Jim Wyckoff, senior analyst at Kitco Metal, said interest rate cuts will probably be pushed to the second half of the year as U.S. economic data has been too strong lately to see a rate cut by May. He added there is limited buying interest in gold due to the recent rally in the stock market.

“We are expecting some cooling inflation and if we don’t get it, it will put some pressure on prices,” he said.

The Reuters poll for U.S. January CPI projects a 0.2% monthly rise while core CPI is expected up 0.3%.

The U.S. CPI data is due on Tuesday, followed by U.S. retail sales data on Thursday and producer price index (PPI) data on Friday, while markets also await comments from at least seven Fed officials this week.

Last week, several Fed policymakers, including Chair Jerome Powell said they would wait to cut rates until they were more confident that inflation would fall to 2%.

Traders see about a 62% chance of a rate cut in May, according to the CME Fedwatch tool.

Pending Fed rate cuts, strong physical demand and official sector buying are projected to lift prices to an average of $2,200/ounce next quarter, said Bart Melek, head of commodity strategies at TD Securities in a note.

Spot platinum gained 0.9% to $879.13 per ounce, while palladium climbed 3.3% to $887.07, and silver was down 0.2% to $22.55 per ounce.