Gold prices fall to three-month low ahead of US inflation data

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Gold bars are counted in Istanbul

Yoray Liberman | Getty Images

Gold prices fell to a three-month low on Wednesday as a strong dollar continued to dampen bullion as investors await monthly inflation data from the United States, which could have a impact on the Federal Reserve’s monetary policy stance.

Spot gold was down 0.1% at $1,838.26 an ounce by 0330 GMT after hitting its lowest level since Feb. 11 earlier in the session. US gold futures fell 0.2% to $1,836.50.

US consumer price index (CPI) data for April is due at 12:30 GMT.

Markets priced in the current move in real yields ahead of the CPI data. Rising real yields drove gold down and supported the USD despite declining nominal yields, said Stephen Innes, managing partner at SPI Asset Management.

Analysts expect CPI data to show a sharp decline in monthly growth, cooling to 0.2% in April from 1.2% the previous month, and an annual increase of 8.1% .

The dollar has hovered near recent 20-year highs, making greenback-priced bullion less attractive to other currency holders.

“The problem for investors in gold and other commodities that have been used as inflation hedges is that the Fed will hike rates at all costs to put out the fires of inflation,” Innes said.

Fed officials strengthened their case on Tuesday for the fastest round of interest rate hikes since at least the 1990s to fight inflation, while President Joe Biden urged the US central bank to rein in the price hikes that he said were hurting American households.

Gold is considered a hedge against inflation and a safe store of value in times of political and economic crisis, but it is highly sensitive to rising US short-term interest rates, which increases the cost of gold. advisability of holding bullion at zero return.

Spot silver gained 0.8% to $21.40 an ounce, platinum rose 0.8% to $971.33 and palladium rose 0.1% to $2,067.47 .

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