Gold firms, traders eye US inflation data for Fed’s policy path

  • US CPI due on Wednesday
  • Dollar down 0.1 percent
  • Palladium up 2%

May 8 (Reuters) – Gold prices rose on Monday as the dollar eased and economic risks prevailed, as investors braced for U.S. inflation data to gauge the Federal Reserve’s policy path.

Spot gold was up 0.3% at $2,022.76 an ounce by 0915 GMT. U.S. gold futures rose 0.3% to $2,029.80.

The dollar index fell 0.1%, making bullion more attractive to foreign buyers.

“Gold remains supported as markets remain wary of further US financial instability, which will only heighten the risk of a US recession. If problems among regional banks are thrown back into the spotlight, it could trigger another leg up for this safe haven .” said Han Tan, market analyst at Exinity.

Investors and traders are still holding on to bets that the Fed will eventually cut interest rates later this year, supporting zero-yielding gold, Tan added.

Concerns surround the banking sector since the collapse of US-based Silicon Valley Bank accelerated a flight to a safe haven, helping gold post a monthly gain in April.

Apart from the data from the US consumer price index (CPI) due on Wednesday, traders are also watching developments around the country’s banking sector and debt ceiling.

This week’s inflation readings will also follow data showing that US job growth accelerated in April, which also supported suggestions that the Fed may be forced to keep interest rates higher for longer and triggered sharp falls in gold on Friday.

“If US inflation comes higher, the Fed may have to reassess its strategy, giving a boost to the dollar and in turn leading to a reversal in gold,” said Jigar Trivedi, analyst at Mumbai-based Reliance Securities.

Spot silver fell 0.2% to $25.61 an ounce, while platinum rose 1% to $1,069.51.

Palladium rose 2% to $1,520.63.

Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Sherry Jacob-Phillips

Our standards: Thomson Reuters Trust Principles.

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