Following Inflation Data, Gold Is Under Pressure From Fed Rate Cut Doubts

(CTN News) – On Tuesday, gold prices dropped more than 1% at one point after a hot U.S. inflation report dimmed the chances of the Federal Reserve cutting interest rates in the near future as a result of a hot inflation report.

Gold prices were down 0.9% at $2,161.39 per ounce as of 11:10 a.m. eastern time (1510 GMT), retreating from a record high of $2,194.99 reached on Friday when the metal reached a record high. There was also a 1% drop in futures for U.S. gold to $2,167.10 on Tuesday.

A solid increase in consumer prices was recorded in the United States in February, suggesting that inflation is still sticky. On a month-over-month basis, the Consumer Price Index (CPI) rose 0.4% in February, according to the latest data. As a result, it increased 3.2% over the past year, exceeding the forecast of 3.1%.

The CPI report came in a bit sweaty, but the market expected a high print, so the initial reaction was muted, but prices have been volatile since then,” said Tai Wong, an independent metals trader in New York.

There will still be reasons for gold bulls to drive up the price of gold,

He said. Therefore, the focus will shift to the Fed’s meeting next week, when central bankers are expected to update their dot plots, which illustrate how interest rates are expected to move.

It appears that according to CME FedWatch, the market still believes that there is a 70% chance of an U.S. rate cut by the end of June. On March 20, U.S. central bank officials are expected to hold their next policy meeting.

A low interest rate helps the gold price since it reduces the opportunity cost associated with holding the precious metal that does not earn any interest while it is held.

There are some signs that the prices will consolidate in the short run and stabilize around $2,100, and will eventually break above $2,200 by the end of the second quarter of this year, said Aakash Doshi, head of commodities, North America at Citi Research.

In the spot platinum market, platinum is down 1.4% to $919.65 an ounce, while palladium is up 0.1% to $1,030.75.

There was a report from UBS that said that palladium is likely to remain oversupplied in the coming years, as the demand for autocatalysts is expected to decline.

There was a 1.1% drop in silver prices to $24.15.

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