Gold rises on softer dollar, yields; U.S. inflation in focus

Gold eked out gains on Wednesday, helped by a weaker dollar and a retreat in U.S. Treasury yields, although prices moved in a tight range as investors refrained from making large bets ahead of U.S. inflation data.

Spot gold rose 0.5% to $1,834.30 per ounce. U.S. gold futures were 0.4% higher at $1,835.10.

“Dollar is down a little bit and it seems somewhat supportive to gold, but overall the gold market is just kind of flat in anticipation of tomorrow’s CPI number,” said Daniel Pavilonis, senior market strategist at RJO Futures.

Benchmark 10-year U.S. Treasury yields were off their November 2019 highs, while the dollar eased, making greenback-priced bullion cheaper for other currency-holders.

All eyes are on U.S. consumer price data for January due on Thursday that could provide more clarity on Federal Reserve’s rate hike trajectory.

A robust inflation reading is expected to burnish gold’s mettle as an inflation hedge, but U.S. interest rate increases would raise the opportunity cost of non-yielding bullion.

U.S. central bank officials have signalled they will start raising interest rates next month to fight high inflation.

Atlanta Fed president Raphael Bostic said on Wednesday U.S. may be nearing a turn lower in inflation, but added he is still leaning towards a slightly faster pace of rate increases this year.

“Rising prices are eroding the value of fiat currencies around the world, making gold an appealing investment for many, Fawad Razaqzada, analyst with ThinkMarkets, wrote in a note.

“But gold must now clear the key $1,830-$1,850 resistance range, if it were to make a more serious comeback.”

Among other precious metals, silver rose 0.5% to $23.30 per ounce, platinum fell 0.2% to $1,030.52 while palladium rose 1.9% to $2,289.69.