Gold caught in range as inflation risks keep investors on edge

LONDON: Gold prices were little changed on Wednesday as a pullback in U.S. Treasury yields ahead of U.S. inflation data, which is widely expected to be robust, kept bullion investors on edge.

Spot gold was up 0.1% at $1,827.34 per ounce by 1216 GMT, trading in a narrow $5 range. U.S. gold futures were steady at $1,828.

Spot gold prices are attempting to retest the $1,830 resistance region that has repelled bullion bugs on several occasions since July 2021, said Extinity analyst Han Tan.

“Prices must also contend with the implications of Thursday’s U.S. inflation figures, whereby more evidence of persisting inflationary pressures that rouses the Fed into a more aggressive policy stance could dampen the precious metal’s allure.”

Analysts expect gold prices to largely stay around current levels until the release of the January data, which could offer more cues on the pace of interest rate hikes.

While a robust inflation reading is expected to burnish gold’s mettle as an inflation hedge, U.S. interest rate increases would raise its opportunity cost as a non-yielding asset.

“It is a little bit of a mixed bag for gold prices, so on the one hand you have a slightly firmer U.S. dollar, and on the other hand, bond markets are recovering a little bit from the losses over the last couple of days,” Quantitative Commodity Research analyst Peter Fertig said.

Benchmark 10-year U.S. Treasury yields slipped from the November 2019 high reached in the last session, while the dollar was steady, but off lows hit on Friday.

Among other metals, silver edged up 0.3% to $23.25 per ounce, having hit its highest since Jan. 27.

Platinum rose 0.6% to $1,038.32 and palladium fell 0.7% to $2,262.50.