Gold drops as traders eye CPI data for Fed clues

Gold prices slipped on Monday ahead of U.S. inflation data and comments from Federal Reserve officials that could offer insight into the central bank’s interest rate plans.

Spot gold was down 0.4% to $2,015.59 per ounce. U.S. gold futures also fell 0.5% to $2,029.20 per ounce.

Jim Wyckoff, senior analyst at Kitco Metal, said interest rate cuts would probably be pushed to the second half of the year as U.S. economic data has been too strong lately to see a rate cut by May. He added there was limited buying interest in gold due to the recent rally in the stock market.

“We are expecting some cooling inflation and if we don’t get it, it will put some pressure on prices,” he said.

The Reuters poll for U.S. January CPI projects a 0.2% monthly rise while core CPI is expected up 0.3%.

The U.S. CPI data is due on Tuesday, followed by U.S. retail sales data on Thursday and producer price index (PPI) data on Friday, while markets also await comments from at least seven Fed officials this week.

Last week, several Fed policymakers, including Chair Jerome Powell said they would wait to cut rates until they were more confident that inflation would fall to 2%.

Traders see about a 57% chance of a rate cut in May, according to the CME Fedwatch tool.

Pending any Fed rate cuts, strong physical demand and official sector buying are projected to lift prices to an average of $2,200/ounce next quarter, said Bart Melek, head of commodity strategies at TD Securities in a note.

Spot platinum gained 2.2% to $890.44 per ounce, while palladium climbed 3.9% to $892.08, and silver was steady at $22.61 per ounce.

Source from CNBC: https://www.cnbc.com/2024/02/12/gold-takes-pause-in-light-trading-eyes-on-fed-in-data-packed-week.html