Gold near 2-week high as inflation risks lift safe-haven appeal
Gold prices were steady on Wednesday near a two-week high scaled in the previous session, as inflationary risks and Russia-Ukraine tensions underpinned the safe-haven metal, despite the prospect of an aggressive rate hike by the U.S. central bank.
Fundamentals
Spot gold was steady at $1,825.89 per ounce by 0108 GMT, hovering close to Tuesday’s high of $1,828.68. U.S. gold futures dipped 0.1% to $1,826.30.
Benchmark 10-year U.S. Treasury yields were steady, but slightly lower compared with the November 2019 high reached in the previous session.
U.S. inflation data for January is due on Thursday and expectations are for a 7.3% annual rise, according to a Reuters poll, after robust labor data last week.
Market participants are pricing in more than a 70% chance of a 25 basis point hike and a nearly 30% chance of a 50 bp hike at the U.S. Federal Reserve’s mid-March meeting, according to CME’s FedWatch Tool.
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion. Higher rates also boost the dollar, pressuring the greenback-priced precious metal.
The European Central Bank will do everything necessary to steer inflation back to its 2% target over time, Bank of France Governor Francois Villeroy de Galhau said on Tuesday.
French President Emmanuel Macron, the first leader of a major Western power to meet Vladimir Putin since Russia massed troops near Ukraine, said he believed steps can be taken to de-escalate the crisis and called on all sides to stay calm.
Among other metals, silver was steady at $23.18 per ounce, platinum fell 0.5% to $1,026.94, and palladium was down 0.4% at $2,239.12
