Gold held steady after closing down the most in two months on higher-than-expected US inflation data.
(Bloomberg) — Gold held steady after closing down the most in two months on higher-than-expected US inflation data.
Bullion ended 1.3% lower Tuesday after the consumer-price index figures were released, spurring gains in the dollar and Treasury yields. Markets rapidly priced in another 75 basis point increase, with others speculating an even larger move may be in the cards.
The metal steadied above the $1,700-an-ounce mark on Wednesday, which some analysts see as a floor. Prices had been trending upward as the greenback unwound gains after touching a record last week.
The Fed’s aggressive monetary tightening has caused the precious metal to trend lower this year as higher interest rates put pressure on non-yielding assets. Persistent outflows from gold-backed exchange-traded funds have also acted as a headwind.
“Monetary and fiscal policy tightening represent the ‘turning of the screw’ that we believe will keep gold broadly on the defensive this year and next,” James Steel, chief precious metals analyst at HSBC Holdings Plc, wrote in a note. “We anticipate the recent tightening –- which we expect to continue –- will further weigh on gold.”
The bank expects gold prices to average $1,820 an ounce this year before sliding to $1,750 in 2023.
Gold edged higher to $1,705.08 an ounce at 1:40 p.m. in London. The Bloomberg Dollar Spot Index weakened slightly after rising 1.2% on Tuesday. Silver and platinum gained, while palladium was steady.
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