Gold prices declined below the crucial $2,000 per ounce threshold to a two-month nadir on Tuesday, as a stronger-than-anticipated U.S. inflation report tempered the outlook for an early interest rate reduction from the Federal Reserve.
Spot gold witnessed a 1.3% drop to $1,992.5042 per ounce, marking its lowest point since Dec. 13. Similarly, U.S. gold futures also decreased by 1.3% to $2,005.60.
The data indicated that U.S. consumer prices surged more than anticipated in January, fueled by rising shelter and healthcare expenses.
“That was not the report that the market wanted to see,” remarked Tai Wong, an independent metals analyst based in New York.
“Fed doves are seeking refuge today as surprisingly persistent inflation has diminished the likelihood of a May rate cut to below 50% for now,” Wong added.
Traders are now speculating that Fed policymakers will likely hold off on cutting interest rates until June, in response to the U.S. CPI data. Elevated interest rates amplify the opportunity cost of holding onto bullion.
After the release of the inflation figures, the dollar surged by 0.7% to reach a three-month peak against its counterparts, rendering gold pricier for holders of other currencies. Concurrently, the U.S. 10-year Treasury yield also climbed.
The CPI release instigated “large-scale Commodity Trade Advisor (CTA) liquidations in gold markets… but prices would need to revisit the $1,950 per ounce range to stimulate the next algorithmic selling program,” stated TD Securities in a note.
Investor attention is now directed toward Thursday’s retail sales data and Friday’s producer price index (PPI) figures. Additionally, market participants will closely monitor remarks from numerous Fed officials throughout the week.
Several U.S. Fed officials, including Chairman Jerome Powell, emphasized last week that they require further evidence of inflation continuing to abate before contemplating rate cuts.
Elsewhere in the market, spot platinum depreciated by 1.8% to $872.5872 per ounce, palladium slumped by 3.1% to $864.6654, and silver lost 2.8% to $22.0646.
