Gold prices were steady on Thursday near a one-week high scaled in the previous session, as the U.S. dollar and Treasury yields retreated after inflation data in line with expectations reinforced the need for quicker interest rate hikes.
Spot gold was flat at $1,825.82 per ounce, as of 0637 GMT. U.S. gold futures was also unchanged at $1,826.50.
In the previous session, bullion hit a one-week high of $1,827.92, its highest since Jan. 5.
“Many of them are waiting to get a clear direction from the Fed side (about tapering) as well as the performance of the U.S. dollar. That’s why prices are almost steady,” said Hareesh V, head of commodity research at Geojit Financial Services, Kochi, India.
U.S. consumer prices surged in December, with the annual increase in inflation the largest in nearly four decades, cementing expectations the Federal Reserve will start raising interest rates as early as March.
Following the inflation reading, the dollar (.DXY) weakened to a two-month low, making gold more attractive for overseas investors.
“If the market doesn’t catch up to the Fed’s pricing of 2% (interest rate), gold will probably remain supported. But will it go higher? That’s the big question. We need to have some more convincing walk back from the Fed narrative,” said Stephen Innes, managing partner at SPI Asset Management, referring to the catalyst for gold to move out of its current trading range.
U.S. benchmark 10-year yields also slipped, moving away from two-year highs hit earlier in the week. Lower yields reduce the opportunity cost of holding non-interest bearing gold.
Gold is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.
Spot silver was flat at $23.11 an ounce, platinum shed 0.4% to $973.65, and palladium fell 0.4% to $1,903.35.