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- U.S. CPI in Jan rose 7.5% annually
- U.S. rate futures lift chances of 50 bps hike in March
- 10-year yield tops 2% for first time since August 2019
Feb 10 (Reuters) – Gold prices edged up on Thursday as a spike in U.S. consumer prices boosted the metal’s appeal as an inflation hedge, but expectations that the data would support the case for aggressive interest rate hikes capped the gains.
Spot gold was up 0.2% at $1,836.08 per ounce by 10:32 a.m. EST (1532 GMT), after falling as much as 0.6% following the data. U.S. gold futures fell 0.1% to $1,834.30.
“A rising interest rate environment does nip at the heels of the gold market,” said David Meger, director of metals trading at High Ridge Futures.
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“However, the other side of that coin is a confirmation of the ongoing inflationary trend that we believe is the underlying fundamental push behind gold’s recent move.”
The U.S. consumer price index jumped 7.5% in the 12 months through January, the biggest year-on-year increase since 1982, topping expectations of a 7.3% rise. read more
Federal funds rate futures increased the chances of a half percentage-point tightening by the U.S. Federal Reserve at next month’s policy meeting following the data.
While gold is considered a hedge against soaring inflation, a resultant hike in interest rates would increase the opportunity cost of holding non-yielding bullion.
Benchmark 10-year U.S. Treasury yields topped 2% for the first time in 2-1/2 years, while the dollar (.DXY) gave up earlier gains to make bullion less expensive for holders of other currencies.
“I guess with market participants now pricing in six rate hikes this year, there is some concern that it might impact economic growth down the road, and that is supporting the gold price,” UBS analyst Giovanni Staunovo said.
Wall Street’s main indexes dropped at open on Thursday, with Big Tech leading declines.
Elsewhere, spot silver rose 0.8% to $23.48 per ounce, platinum advanced 1% to $1,044.27, and palladium jumped 1.4% to $2,309.76.
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Reporting by Kavya Guduru in Bengaluru; Editing by Aditya Soni
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