Gold prices retreat from near-peak levels ahead of US inflation data

Gold prices fell from near-peak levels on Tuesday ahead of an important US inflation report that may give more clarity on when the Federal Reserve (US central bank) may start cutting interest rates.

According to Reuters, gold fell in spot transactions by 0.3% to $2,176.49 per ounce by 0743 GMT, after rising for nine consecutive sessions. Gold hit a record high of $2,194.99 on Friday.

Gold futures in the United States also fell 0.3% to $2,182.70.

Yip Jun Rong, a market strategist at IG, said that the excellent rise in gold prices calls for some relief in the near term.

“The progress on US inflation stalled somewhat in the January reading, but follow-up comments from policymakers seem to indicate that they are willing to view this as a one-time event,” he added. Another surprise bout of higher-than-expected inflation data for February is likely to go against that, which could lead to some decline in gold prices in the near term.”

The US consumer price index for February, due to be reported at 1230 GMT, is likely to rise 0.4 percent on a monthly basis and keep the annual rate steady at 3.1 percent, according to a Reuters poll.

Traders expect US interest rates to be cut three or four times by 25 basis points each time, with a 72% chance of the first cut in June, according to the London Stock Exchange Group (LSEG) interest rate probability app. Lower interest rates would increase the demand to buy the yellow metal, which does not generate a return.

Meanwhile, the US Treasury is scheduled to sell ten-year bonds worth $39 billion later Tuesday.

Tim Waterer, chief market analyst at KCM Trade, said the bond offering is secondary to the broader outlook for interest rates and the main focus remains on consumer and producer price numbers this week, but if there is not much demand for bonds, it may push… So returns rise, which reduces the attractiveness of gold.

The dollar was broadly stable on Tuesday.

As for other precious metals, platinum fell in spot transactions 0.4% to $929.70 per ounce, palladium fell 0.8% to $1022.90, and silver fell 0.2% to $24.37.