BENGALURU: Gold ekes out gains with all eyes on US PCE data

Gold prices edged higher on Wednesday as investors awaited US inflation data that could offer fresh clues about when the Federal Reserve will start easing its monetary policy.

Spot gold was up 0.3% at $2,185.89 per ounce as of 1205 GMT. US gold futures rose 0.4% at $2,184.80. Investors now look forward to US core personal consumption expenditure (PCE) price index data for February due on Friday. The index was seen rising 0.3% last month, which would keep the annual pace at 2.8%.

“The Fed probably needs higher inflation figures to derail the path of three rate cuts this year in the US,” although liquidity might be thinner due to a holiday in Europe on Friday, said UBS analyst Giovanni Staunovo.

Gold hit a record high last week after Fed policymakers indicated they still expect to reduce interest rates by three-quarters of a percentage point by 2024 end, despite recent high inflation readings. “Central banks continue to report ongoing gold purchases, driven by their desire to diversify their currency reserves.

This is offsetting the weakness from investment demand, which focuses more on US rate cut expectations,” Staunovo said. Traders are pricing in a 70% probability that the Fed will begin cutting rates in June, according to the CME Group’s FedWatch Tool.

Lower interest rates reduce the opportunity cost of holding bullion. SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.62% to 830.15 tons on Tuesday. “Aligned with the supported yet more sideways price action, open interest figures show that most of the early March inflows into gold have so far stuck,” JP Morgan said in a note.

India’s gold imports are set to plunge by more than 90% in March from the previous month as banks cut imports after record-high prices hit demand. Spot silver was up 0.2% at $24.48 per ounce, platinum lost 1% to $894.45 and palladium fell 1.2% to $981.71.