(Reuters) – Gold prices picked up on Tuesday from a three-week low, helped by a pullback in the dollar after an official U.S. report showed that consumers expected lower inflation cemented bets for interest rate cuts from the Federal Reserve.
Spot gold was up 0.3% at $2,034.49 per ounce, as of 0316 GMT, after hitting a three-week low on Monday. U.S. gold futures rose 0.4% to $2,040.60 per ounce.
A New York (NY) Federal Reserve report on Monday said consumers expected lower inflation as well as weaker income and spending over the next several years.
The NY Fed survey may help to provide some support for gold prices as it brings “further relief to the inflation picture and has provided more room for Fed officials to consider earlier rate cuts in 2024”, said IG market strategist Yeap Jun Rong.
The dollar index weakened 0.1%, making bullion more attractive for other currency holders. [USD/]
Lower interest rates decrease the opportunity cost of holding non-yielding bullion.
However, “given the strong rebound in risk-on sentiments overnight, gold prices have to balance a dovish rate outlook with potential safe-haven outflows as well,” added Rong. [MKTS/GLOB]
Last week’s stronger-than-expected jobs data, coupled with the latest Fed minutes that noted an uncertainty over timings of rate cuts, tempered sentiment for an early interest rate cut in the U.S.
Market participants are pricing in an about 62% chance of a rate cut by the U.S. central bank in March, down from a nearly 90% probability seen before the New Year, according to the CME FedWatch tool.
Investors now await Thursday’s U.S. consumer price inflation report for further clarity on the scale and depth of Fed’s rate cut.
Spot silver rose 0.3% to $23.15 per ounce, while platinum climbed 0.4% to $949.29, and palladium gained nearly 1% to $1,007.01.
(Reporting by Harshit Verma in Bengaluru; Editing by Sherry Jacob-Phillips and Rashmi Aich)
By Harshit Verma
