Gold Edges Up as Dollar Shrinks Ahead of Inflation Showdown

11 Jan 2024 , 09:34 AM

A weaker dollar helped gold prices rise on Thursday ahead of a consumer inflation data that is expected later in the day and may provide some insight into the U.S. Federal Reserve’s interest rate trajectory.

Spot gold was up 0.2% at $2,028.19 an ounce. Futures for US gold increased by 0.3% to $2,032.80.

Buyers holding other currencies found bullion more appealing when the dollar index dropped by 0.1%.

The US CPI inflation report is scheduled to be released at 1330 GMT. Reuters polled economists predict that core inflation would likely drop to 3.8%, the lowest level since mid-2021, while year-over-year inflation will likely remain at 3.2% in December.

On Friday, U.S. producer prices will be disclosed.

The opportunity cost of owning non-yielding bullion is reduced by lower interest rates.

According to LSEG’s interest rate probability software, IRPR, traders are speculating on 140 basis points (bps) worth of interest rate reductions by the US Federal Reserve this year, with a 67% possibility that they start as early as March.

In other news, figures released on Thursday revealed that Australia’s trade surplus reached an eight-month high in November as coal exports increased and auto imports declined following a string of positive months.

Global financial markets saw a 1.25% increase in the opening of Japan’s benchmark Nikkei average, while Asia-Pacific shares outside of Japan had a 0.5% decrease for the seventh straight day.

Consumers anticipate a decrease in inflation, according to a New York Fed report earlier this week, while Fed Governor Michelle Bowman said the monetary policy of the U.S. central bank seemed ‘sufficiently restrictive’.

Palladium increased by over 1% to $1008.67, platinum increased by 0.2% to $920.40, while spot silver increased by 0.5% to $22.96 per ounce.

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