Gold shows modest gain amid dollar retreat and inflation report anticipation

Shafaq News / Gold prices saw a slight increase during today's trading session, Wednesday, as the dollar and Treasury bond yields dipped ahead of the key US inflation report. This report could shed light on the Federal Reserve's interest rate reduction direction.

Spot gold edged up 0.3% to $2,035.23 per ounce, as of 0929 GMT. US gold futures rose 0.4% to $2,041.40 per ounce.

"If the CPI figures exceed market expectations, perhaps forcing the Fed to delay its policy pivot, that could force bullion to relinquish more of its gains from the final quarter of 2023," said Han Tan, chief market analyst at Exinity Group.

"However, further evidence of US disinflation taking hold may propel spot gold closer to $2,100 in the immediate term."

The dollar index ticked down about 0.2% against a basket of currencies, making bullion more attractive for foreign currency holders.

The focus of investors now switches to Thursday's US consumer and producer inflation numbers, which are expected to show that headline inflation rose 0.2% in December and 3.2% year-on-year.

A New York Federal Reserve report revealed that consumers expect a decline in inflation, while Fed Governor Michelle Bowman reversed her long-held hawkish position on Monday, stating that US monetary policy is now "sufficiently restrictive".

According to the CME Fed Watch Tool, the market currently expects about a 66% chance of a rate cut at the Fed's March 19-20 policy meeting.

Lower interest rates reduce the opportunity cost of investing in non-yielding bullion.

(Reuters)