Gold eases as bets for more Fed rate hikes blunt appeal

GOLD prices ticked lower on Thursday (Feb 16), as the dollar firmed after recent economic data boosted bets that the US Federal Reserve would raise interest rates further to combat high inflation.

Spot gold was down 0.1 per cent at US$1,835.26 per ounce, as of 0048 GMT, after hitting its lowest level since early January in the previous session. US gold futures were little changed at US$1,845.90.

The dollar index was up 0.1 per cent after hitting a six-week peak on Wednesday, making greenback-priced gold more expensive for buyers holding other currencies.

US retail sales rebounded by 3 per cent in January after two straight monthly declines, data showed on Wednesday, pointing to the economy’s continued resilience despite higher borrowing costs.

On Tuesday, data showed the US consumer price index increased 0.5 per cent last month, while in the 12 months through January, the CPI increased 6.4 per cent.

Interest rate futures markets are now expecting the Fed’s target rate to peak above 5.2 per cent in July, from a current range of 4.50 per cent to 4.75 per cent.

Higher interest rates discourage investment in gold, which does not bear any interest, although the metal is considered a hedge against soaring prices.

The yield on 10-year Treasury notes rose to its highest since Jan 3.

Eurozone inflation remains far too high and the European Central Bank will keep raising interest rates to dampen underlying price pressures, ECB president Christine Lagarde said on Wednesday, repeating the bank’s most recent policy guidance.

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Gold ticks higher as dollar weakness offsets rate-hike bets

Spot silver eased 0.1 per cent to US$21.61 per ounce, platinum was little changed at US$915.16 and palladium was unchanged at US$1,464.36. REUTERS