Gold gains ahead of US CPI data due to the Fed's caution

12 Oct 2023 , 10:09 AM

As the U.S. dollar and Treasury yields stuttered on the Federal Reserve’s cautious stance on interest rates and ahead of a crucial inflation data that could offer more clarity on the future policy path, gold stayed steady near two-week highs on Thursday.

Spot gold was up 0.1% at $1,874.49 per ounce, not far from its best level since September 29. At $1,887.50, U.S. gold futures remained stable.

The dollar index and U.S. Treasury yields were trading near two-week lows, which increased the appeal of gold that doesn’t pay interest.

In September, U.S. producer prices rose more than anticipated, although factory gate inflation pressures remained low. The conflicting report was released ahead of Thursday’s consumer price index data, which is anticipated to show that inflation decreased last month.

Fed policymakers adopted a more cautious stance last month as a result of a growing sense of uncertainty regarding the direction of the U.S. economy, which was exacerbated by volatile data and tightening financial markets, which posed risks to growth. This stance was reiterated by top U.S. central bank officials in a series of statements this week.

Higher market interest rates, according to Fed Governor Christopher Waller, may assist the Fed contain inflation and allow it to ‘watch and see’ whether or not it needs to raise its own policy rate once more.

Despite being disproven within days of each of the last two monthly Reuters surveys, bond market analysts continue to hang onto their predictions that U.S. Treasury yields will fall by year’s end as well as their belief that 10-year yields have peaked.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported that its holdings increased on Wednesday by 0.10%.

While palladium increased by 0.3% to $1,170.36 and platinum increased by 0.5% to $889.05, spot silver slipped 0.2% to $22.02 per ounce.

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