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U.S. dollar index down 0.2%
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U.S. CPI due at 1330 GMT
(Updates prices)
By Kavya Guduru
Feb 14 (Reuters) - Gold prices rose on Tuesday as the
dollar retreated, with investors bracing for U.S. inflation data
that could determine the Federal Reserve's next monetary policy
moves.
Spot gold was up 0.5% at $1,861.93 per ounce, as of
0645 GMT, after falling to its lowest since early-January in the
previous session. U.S. gold futures rose 0.4% to
$1,870.60.
Gold is highly sensitive to rising interest rates, which
lift the opportunity cost of holding the non-yielding asset.
"If the disinflation trend in the U.S. shows signs of
slowing (even if it's temporary), then caution over a hawkish
Fed could undermine risk sentiment and gold, while USD may find
further support," said OCBC FX strategist Christopher Wong.
Investors are intently awaiting January's U.S. consumer
price index (CPI) data due later in the day. Economists polled
by Reuters expect the headline CPI figure gaining 0.5%
month-on-month. If the CPI comes in softer-than-expected, the Fed could
potentially afford to slow rate hikes and "this could imply a
resumption of USD softness and gold rebound," Wong added.
Several Fed policymakers have recently signalled that more
interest rate hikes were needed to bring inflation down to its
2% target.
Money markets expect the Fed's target rate to peak at 5.188%
in July, from a current range of 4.5% to 4.75%. "Bullion traders are trying to anticipate the Fed's next
move, with indications (the Fed) may need to stay hawkish for
longer," analysts at ANZ said in a note.
"Nevertheless, we expect a weaker USD will remain on a
downward trajectory for rest of the year, putting upward
pressure on the precious metal."
The dollar index slipped 0.2%, making
greenback-priced gold less expensive for buyers holding other
currencies. Spot silver was little changed at $21.97 per ounce,
platinum edged up 0.1% to $954.76, while palladium rose 0.2% to $1,569.07.
(Reporting by Kavya Guduru in Bengaluru; Editing by Uttaresh.V,
Nivedita Bhattacharjee, and Janane Venkatraman)
