Gold prices inched higher on Tuesday as appetite for risk weakened ahead of U.S. inflation data that could support the Federal Reserve’s aggressive policy stance to contain rising pricing pressures.
Spot gold was up 0.2% at $1,956.78 per ounce, as of 0621 GMT, after hitting its highest in nearly a month on Monday. U.S. gold futures rose 0.6% at $1,960.30.
ABC Bullion’s global general manager, Nicholas Frappell, said gold was catching a bid on weaker equities and geopolitical tensions while facing headwinds from weakening crude, a firmer dollar and rising real yields.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3%, as investors braced for red-hot U.S. inflation data that is expected to show prices last month gained the most in more than 16 years.
“(U.S. CPI) expectations are for 1.50% m/m, if the number is materially lower, expect gold to weaken,” Frappell said.
The dollar index was back above 100, testing last week’s near two-year high of 100.19, while the benchmark 10-year Treasury yield rose to its highest since December 2018.
A stronger dollar makes gold less attractive for other currency holders, while higher U.S. interest rates and yields increase the opportunity cost of holding bullion, which is also used as a hedge against inflationary pressures.
Auto-catalyst metal palladium gained 0.9% to $2,453.83, after hitting its highest since March 24 at $2,550.58 on Monday following a sale block by London markets.
“(Palladium is) basically in a choppy consolidation after that reversal (on Monday). About $2,600 is the top and $2,150 is the bottom and in there is a bunch of back and forth chop,” said Ilya Spivak, a currency strategist at DailyFX.
“Much of what happens next in terms of real trend development will depend on some kind of a sign that negotiations have taken a step toward a substantive ceasefire,” he said, referring to the Russia-Ukraine talks.
Among other precious metals, spot silver was up 0.3% at $25.16 per ounce and platinum rose 0.7% to $983.66.