June 16, 2024

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Gold companies and traders are eyeing US inflation data for the Fed's policy path

Gold companies and traders are eyeing US inflation data for the Fed’s policy path

  • The US Consumer Price Index is due to be released on Wednesday
  • The dollar fell 0.1%.
  • Palladium is up about 2%.

(Reuters) – Gold prices rose on Monday as the dollar weakened and economic risks spread, while investors braced for US inflation data to gauge the path of Federal Reserve policy.

Spot gold was up 0.3% at $2,023.12 an ounce as of 1028 GMT. US gold futures rose 0.3% to $2,030.70.

The dollar index fell 0.1%, making bullion more attractive to overseas buyers.

“Gold remains supported as markets remain wary of more financial instability in the US, which would only amplify recession risks in the US. If problems between regional banks return to the spotlight, it could trigger another move for the safe-haven asset. This,” said Han Tan, senior market analyst at Exinity.

Tan added that investors and traders are still holding out on bets that the Fed will eventually cut interest rates later this year, propping up gold with no yield.

Worries surround the banking sector since the collapse of a US-based Silicon Valley bank accelerated the flight to safe-haven assets, helping gold post monthly gains in April.

Apart from the US Consumer Price Index (CPI) data due on Wednesday, traders are also keeping a tab on developments surrounding the country’s banking sector and debt ceiling.

This week’s inflation readings will also follow data showing US job growth accelerated in April, which also supported bets that the Federal Reserve may have to keep interest rates higher for longer and triggered sharp falls in gold on Friday.

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“If inflation rises in the US, the Fed may have to reassess its strategy, which leads to a rebound in the dollar, which in turn leads to a reversal in gold,” said Jigar Trivedi, an analyst at Mumbai-based Reliance Securities.

Spot silver fell 0.3 percent to $25.58 an ounce, while platinum advanced 1.3 percent to $1,072.80.

Palladium rose about 2% to $1,518.74.

Reported by Ashitha Shivaprasad in Bengaluru; Editing by Sherry Jacob Phillips

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