Gold prices pulled back slightly on Tuesday from their recent all-time highs after figures showed US inflation at higher-than-expected levels in February, prompting questions over any interest rate cuts.
Prices eased as low as $2,153 an ounce during the day Tuesday, compared with around $2,182 an ounce in late deals on Monday.
US core inflation figures, which strip out volatile items such as energy and food, were released Tuesday. The figures came in at 0.4% in February compared with January, higher than the market’s expected 0.3%. And on a year-on-year basis, February came in at 3.8%, slightly above market expectations of 3.7%.
Higher than expected inflation suggests greater pressure on the US Fed to maintain higher interest rates for longer, weighing on non-yield-bearing assets like gold.
The US dollar also increased against other major currencies on Tuesday, weighing on dollar-denominated gold prices, while US 10-year Treasury yields also rebounded, adding further to the selling pressure on gold.
The pullback in prices follows all-time highs for gold, which briefly hit $2,195 an ounce on Friday as the markets bet on rate cuts materialising as soon as June, with additional support coming from recent central bank buying and safe-haven flows amid current heightened geopolitical tensions.
Elsewhere, the markets will be looking ahead to Thursday for the release of US producer prices for February as well as monthly retail sales, providing a further update on the state of the US economy.
Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.
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