Gold inched up in choppy trade on Wednesday as concerns over inflation and economic growth buoyed its safe haven appeal even as investors positioned for U.S. inflation data that could set the tone for the Federal Reserve’s rate hike timeline.
Spot gold rose 0.3% to 1,857.60 per ounce by 11:07 a.m. EDT (1507 GMT). U.S. gold futures rose 0.4% to $1,858.50.
“We’re seeing this push-pull mentality in the gold market… Now the focus is going to be on Friday’s CPI data to see if inflation has in fact started to pull back a bit or continues to run hotter than expected,” said David Meger, director of metals trading at High Ridge Futures.
But even as inflation continues to run hot, gold faces headwinds moving forward from a Fed that is now seemingly committed to fighting these inflationary pressures, Meger added.
Although seen as an inflation hedge, gold is sensitive to interest rate hikes which increase the opportunity cost of holding the non-yielding bullion.
U.S. Treasury yields rose on Wednesday after euro zone gross domestic product beat expectations, adding to bets of a more hawkish ECB, with benchmark 10-year note yields above the key 3% level.
Gold was also benefiting from some safe-haven flows driven by increased economic growth concerns amid deteriorating risk appetite, said Edward Moya, senior analyst with OANDA.
The World Bank on Tuesday slashed its global growth forecast by nearly a third for 2022, warning many countries now faced recession.
But on the physical front, consultants Metals Focus said that gold demand will dip this year amid weaker jewellery sales and retail investment in China due to COVID-19 lockdowns and an economic slowdown.
Elsewhere, silver fell 0.3% to $22.15 per ounce, platinum dipped 0.4% to $1,006.83 and palladium shed 1.5% to $1,954.03.
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