Gold holds steady near 3-week low as markets weigh quicker Fed hikes

[BENGALURU] Gold was flat on Monday (Jan 10), hovering near a 3-week low, as traders awaited December US inflation data that could reinforce the case for earlier-than-expected interest rate hikes by the US Federal Reserve after weaker jobs data.

Spot gold was little changed at US$1,795.11 per ounce by 2.34 am GMT, after hitting its lowest since Dec 16 of US$1,782.10 on Friday (Jan 7). US gold futures were down 0.2 per cent at US$1,794.

US Treasury yields surged last week, following the minutes of Fed policy meeting, which suggested an earlier-than-expected rate hike and the possibility that the Fed may reduce its balance sheet sooner than many have anticipated.

Gold is considered a hedge against higher inflation, but the metal is highly sensitive to rising US interest rates which increase the opportunity cost of holding non-yielding bullion.

Fed funds futures have priced an almost 90 per cent chance of a rate hike in March and a more than 90 per cent chance of another one by June.

US December core CPI was expected to have risen 5.4 per cent annually after climbing 4.9 per cent in November.

US nonfarm payrolls rose by 199,000 jobs last month amid worker shortages, lower than a forecast of 400,000, with moderate job gains expected in the near term as spiralling Covid-19 infections disrupt economic activity.

An uptick in retail appetite for physical gold prompted dealers in India to charge premiums last week, while upcoming Chinese New Year festivities brightened the outlook for sales in Singapore.

US-Russia talks over rising tension in Ukraine also have traders on the edge, as the 2 sides seem far apart and failure risks an armed confrontation on Europe's doorstep.

Spot silver was flat at US$22.29 an ounce, platinum rose 0.1 per cent to US$956.10, and palladium shed 0.3 per cent to US$1,927.25.

REUTERS