Gold halted its latest rally on Wednesday as investors positioned themselves ahead of new US inflation data that could hint at the Federal Reserve’s policy path, with expectations mounting that slower rate hikes are on the horizon.
Spot gold edged 0.2% lower to $1,874.57 per ounce by 1:15 p.m. ET, having set a new eight-month high of $1,886.59 earlier in the session. US gold futures, on the other hand, moved 0.2% higher to trade at $1,879.90 per ounce.
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Prices were trending lower on some “profit taking from the shorter term futures traders ahead of the CPI report tomorrow,” Jim Wyckoff, senior analyst at Kitco Metals, told Reuters, adding that the market could continue to trade sideways ahead of the data.
The US consumer price report will be closely watched for cues on Fed’s strategy after the pace of rate hikes was slowed to 50 basis points in December after four consecutive 75 bps hikes.
Traders see a 77% chance the Fed will raise the benchmark rate by 25 bps to 4.50%-4.75% in February, and see rates peaking at 4.92% by June.
However, HSBC on Wednesday estimated a final 50 bps hike at the January 31-February 1 monetary policy meeting.
“This could be a big report if we get another good reading that shows inflation falling faster than anticipated,” said Craig Erlam, a senior market analyst at OANDA, adding that it could be enough to change the hawkish tone the markets are continuing to hear from the Fed.
“While worries remain about over the scale and impact of the covid outbreak in top gold consumer China, over the longer term, China is expected to bounce back strongly which could stimulate additional demand,” Erlam said.
(With files from Reuters)