Gold prices slip as U.S. inflation test looms

Gold prices dipped on Monday as investors braced for much awaited U.S. January consumer price index data that could steer the Federal Reserve’s rate-hike strategy.

Spot gold last fell 0.57% to $1,854.04 per ounce, while U.S. gold futures settled 0.6% lower at $1,863.50.

Gold was “a little lower heading into tomorrow morning’s (CPI) number,” said Bob Haberkorn, senior market strategist at RJO Futures.

All eyes are on U.S. CPI data due at 8:30 a.m. ET on Tuesday, expected to have climbed 0.4% in January. Revisions to the previous data showed consumer prices rose in December instead of falling as previously estimated.

Inflation numbers could come in a little less than what’s expected, if not in line with them, while a miss in expectations could lead to a buying opportunity for gold, highlighted Haberkron.

Markets have raised the profile for future tightening by the Fed, with rates seen peaking at around 5.15% and with cuts coming later and slower.

Fed Governor Michelle Bowman said the Fed will need to continue to raise interest rates in order to get them to a level high enough to bring inflation back down.

Gold is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion. However, the dollar index was 0.3% lower, while benchmark 10-year Treasury yields were down after they hit their highest level since early January earlier in the session, reducing the pressure on gold prices.

Spot silver fell 0.12% to $21.967 per ounce, platinum gained 1.08% to $954.7081.

Palladium rose 1.72% to $1,569.024 after falling to a near three-year low earlier in the session.

“Given the downside risk to autocatalyst demand from potential recessions, the palladium price could continue lower,” said Heraeus analysts in a note.