Gold tumbles on inflation worries, rate hikes back on table

13 Mar 2024 , 12:09 PM

Wednesday saw a steady increase in gold prices after they had seen their largest monthly fall the previous session due to a sticky U.S. inflation report that raised bond yields and somewhat dashed expectations for a Federal Reserve interest rate cut in June.

Spot gold was up 0.1% to $2,158.26 an ounce. US gold futures dropped to $2,163.50, down 0.1%.

February saw a strong increase in U.S. consumer prices due to rising fuel and housing expenses, indicating some stickiness in inflation.

Last month, the Consumer Price Index (CPI) increased by 0.4%. After rising 3.1% through January, it climbed by 3.2% in the 12 months through February, barely exceeding the 3.1% expectation.

Tuesday saw a 1.1% drop in gold prices, the worst one-day drop since data on February 13th indicated that consumer prices had also climbed more than anticipated in January.

According to LSEG’s interest rate probability tool, market expectations for the timing of the Fed’s first rate drop were somewhat dampened, pricing in a 68% chance of a decrease of at least 25 basis points in June, down from 72% on Tuesday prior to the data.

Lower rates increase the allure of bullion that never yields.

The dollar and U.S. 10-year Treasury yields also rose in response to the inflation reading. Following a lackluster auction of the benchmark note by the Treasury for $39 billion, the yield on the 10-year Treasury note saw an increase.

In other news, Ukraine launched dozens of drones and missiles at targets in Russia on Tuesday, seriously damaging a large oil refinery and attempting to breach the nation’s land borders with armed proxies.

Spot silver declined 0.1% to $24.14, palladium down 0.7% to $1,034.61, while spot platinum fell 0.1% to $923.70 per ounce.

For feedback and suggestions, write to us at [e-mail]