Gold slipped on Monday as markets pared back expectations of the Federal Reserve’s easing cycle and cautiously awaited a key inflation reading this week, which is likely to provide cues on the timing of interest rate cuts.

Spot gold edged down 0.2% at $2,030.86 per ounce as of 1209 GMT, after rising to its highest since Feb. 7 on Friday. U.S. gold futures dropped 0.4% to $2,040.30 per ounce.

“Gold has kicked off the new week on standby mode as investors seek more clarity on Fed cut timings. Nevertheless, the precious metal seems to be drawing support from a softer dollar and tensions in the Middle East,” said FXTM senior research analyst Lukman Otunuga.

Gold holds steady as traders await Fed minutes

Prices of bullion, which is used as a safe investment during uncertain times, are up more than 10% since the Middle East war began in early October.

On the agenda this week is the core personal consumption expenditure (PCE) price index - the Fed’s preferred gauge of inflation - which is due on Thursday.

“Signs of cooling price pressures and soft data may boost bets around the Fed cutting interest rates – supporting zero-yielding gold as a result,” Otunuga added.

Recent remarks from Fed policymakers suggested the U.S. central bank was in no rush to cut interest rates, largely cementing bets against any rate cuts before June.

A hawkish Fed tone and resilient economic data are pushing out FOMC policy rate cuts to mid-2024, Citi Research, which lowered its 0-3 month gold price target to $1,950 per ounce, said in a note.

Lower interest rates boost the appeal of holding non-yielding bullion and weigh on the dollar. The dollar index was on the back foot after posting its first weekly fall this year last week.

Spot silver lost 1.9% to $22.51 per ounce. Platinum shed 1.8% to $884.53 per ounce and palladium fell 1% to $961.28.