The price of gold fell on Wednesday on the back of the rising dollar, as market participants weighed the timing of potential U.S. interest rate cuts and looked for new clues for clarity on monetary policy.
Spot gold was down 0.1% at $2,311.07 an ounce by 0235 GMT. U.S. gold futures were down 0.3% at $2,316.60.
The dollar index rose 0.1%, making gold at the price of the greenback more expensive for holders of other currencies.
This week’s economic calendar includes consumer sentiment from the University of Michigan on Friday and comments from a series of Fed officials. The US Consumer Price Index is due on May 15.
“The Fed is worried about inflation, but won’t raise rates and wants to cut them again if given the chance – that’s the story. Not much will happen until we We’ll get the CPI next week,” said Ilya Spivak, head of global macro at Tastylive.
If the next reports show scary inflation, the Fed won’t be able to cut rates and that will weigh on gold, he added.
Bullion is used as a hedge against inflation, but rising interest rates reduce the appeal of holding this asset without yield.
Minneapolis Fed President Neel Kashkari said Tuesday that stagnant inflation, supported in part by a strong housing market, means the U.S. central bank will need to keep borrowing costs steady for an “extended period”, or even the whole year.
Markets currently see a 65% chance that US rates will be cut in September, according to the CME’s FedWatch tool.
Separately, China’s central bank added 60,000 troy ounces of bullion to its reserves in April, according to official data released Tuesday, extending the period of consecutive purchases to 18 months.
“I would say we have to continue to watch China because it is a wild card,” Mr. Spivak said.
Silver fell 0.2% to $27.23 an ounce, platinum fell 0.2% to $974.24 and palladium stabilized at $970.84. (Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Sherry Jacob-Phillips and Varun HK)
