Gold prices edged higher on Thursday, helped by a softer US dollar and lower Treasury yields, but hovered near five-week lows as investors tempered rate-cut optimism after hawkish comments from central bank officials and robust data.
Fundamentals
Spot gold rose 0.2% to $2,010.59 per ounce by 0121 GMT, a day after it fell to $2,001.72 - its lowest since Dec. 13.
US gold futures rose 0.3% to $2,012.40.
The US dollar fell 0.2%, making greenback-priced gold less expensive for foreign currency holders. Yields on the benchmark US 10-year Treasury notes also dropped.
US retail sales increased more than expected in December, keeping the economy on solid ground heading into the new year.
Atlanta Federal Reserve President Raphael Bostic is expected to speak at two separate events later in the day.
Bostic said inflation could “see-saw” if policymakers cut rates too soon, warning that inflation’s descent towards the central bank’s 2% goal was likely to slow in the months ahead, the Financial Times reported on Sunday.
Money markets were betting on 142 basis points of Fed rate cuts this year, while pricing in a 61% chance of a March easing, according to LSEG’s interest rate probability app, IRPR.
Lower interest rates decrease the opportunity cost of holding bullion.
Britain’s annual rate of consumer price inflation sped up for the first time in 10 months in December.
Market participants also monitored developments in the Middle East as Israel pressed its assault on southern Gaza.
The United States conducted another round of strikes against Houthi targets in Yemen after militants claimed their second attack this week on a US operated vessel in the Red Sea region.
Spot silver rose 0.4% to $22.61 per ounce, platinum climbed 0.2% to $885.38, and palladium gained 1.2% to $926.54.