Economic news

Gold Stays below Key $2,000 Level as Markets Temper Fed Rate-Cut Bets

  • Gold hit lowest since Dec. 13
  • U.S. consumer prices rose more than expected in January
  • Markets push back on hopes for first Fed rate cut to June now

Feb 14 (Reuters) - Gold prices extended declines on Wednesday, languishing below the key $2,000-per-ounce mark, pressured by a stronger-than-expected U.S. inflation report that caused investors to pull back on bets of rate cuts by the Federal Reserve.

Spot gold fell 0.2% to $1,989.10 per ounce as of 0925 GMT - its lowest since Dec. 13. Bullion fell about 1.4% on Tuesday, its biggest daily loss since Dec. 4.

U.S. gold futures slipped 0.2% to $2,002.30/oz.

"The dovish predictions from the last few months have vanished and investors are now pretty sure that the Fed will need to keep rates higher for a bit longer," said Carlo Alberto De Casa, market analyst at Kinesis Money.

Data on Tuesday showed U.S. consumer prices rose more than expected in January, at a 3.1% annual rise, above forecasts of a 2.9% increase.

Traders have lowered their bets from four quarter-point rate cuts for 2024, in line with the Fed's "dot plot" released in December. The Fed may wait until June before cutting interest rates.

According to the CME Fed Watch Tool, opens new tab, traders now expect an around 78% chance of a rate cut in June. Lower interest rates boost non-yielding bullion's appeal.

Keeping pressure on gold, the U.S. dollar index hovered near a three-month peak, while 10-year Treasury yields were near a 2-1/2-month high.

Investors will now focus on U.S. retail sales data due on Thursday and producer price index numbers due on Friday. At least five Fed officials are due to speak this week.

"The gold market seems biased to tactically correct to $1,925-1,950 at some point in the next 1-3 months, and we would buy the dip," Citi Research said in a note.

Among other precious metals, spot platinum rose 0.7% at $878.02, palladium gained 1.4% at $875.97, and silver lost 0.3% to $22.00.

Reporting by Anjana Anil in Bengaluru; Editing by Janane Venkatraman

Source: Reuters

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