Jan 10 (Reuters) – Gold prices were subdued on Wednesday on a firmer U.S. dollar and elevated treasury yields, ahead of a key U.S. inflation report that could shed some light on the Federal Reserve’s rate cut trajectory.
Spot gold edged down by about 0.2% to $2,024.90 per ounce, as of 0703 GMT. U.S. gold futures fell 0.1% to $2,030.60 per ounce.
“A combination of stability in the U.S. dollar and bond yields, in contrast to what we witnessed at the tail-end of 2023, has effectively applied the brakes to the gold price,” said Tim Waterer, chief market analyst at KCM Trade.
The dollar index ticked up against a basket of currencies, and is up 1.2% so far this month, while yields on 10-year U.S. Treasury notes rose to 4.0264%.
Traders are now focusing on Thursday’s U.S. consumer price inflation report that is expected to show headline inflation rose 0.2% in December and 3.2% on an annual basis.
“Any signs of softness in the data could be a boon for the gold price,” said Waterer.
An official U.S. report revealed that consumers expect a decline in inflation, while Fed Governor Michelle Bowman said the U.S. central bank’s monetary policy seems “sufficiently restrictive”.
Market participants are pricing in an about 66% chance of a U.S. rate cut in March, according to the CME FedWatch tool.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion.
Spot gold may retest support of $2,016 per ounce, a break below which could open the way towards $2,006, according to Reuters technical analyst Wang Tao.
Spot silver fell 0.4% to $22.87 per ounce, while platinum edged 0.2% lower to $927.88, and palladium rose 0.1% to $978.97.
