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U.S. CPI due at 1330 GMT (8:30 a.m. ET)
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Strong CPI number could cause weakness in gold - analyst
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U.S. dollar down 0.4%
(Adds comment, details, and updates prices)
By Ashitha Shivaprasad
Feb 14 (Reuters) - Gold prices edged higher on Tuesday
as the dollar slipped, with investors positioning for a U.S.
inflation report that could influence the Federal Reserve's
interest rate strategy.
Spot gold rose 0.4% to $1,860.69 per ounce by 1301
GMT (8:01 a.m. ET), after falling to its lowest since early
January in the previous session.
U.S. gold futures were also up 0.4% to $1,871.50.
"Gold prices are seeing a modest rebound off 1-month lows as
U.S. yields and the dollar slip back ahead of this afternoon's
January CPI report," said Michael Hewson, chief market analyst
at CMC Markets.
January's U.S. consumer price index (CPI) data is due at
1330 GMT (8:30 a.m. ET) and a Reuters poll forecast the headline
CPI figure to rise 0.5%.
The dollar index fell 0.4%, making greenback-priced
bullion more affordable for buyers holding other currencies.
Benchmark 10-year U.S. Treasury yields dipped for the second
straight session. If the inflation rate turns out to be lower than expected,
the market is likely to scale back its interest rate
expectations, allowing the gold price to rise, analysts at
Commerzbank said in a note.
Although bullion is considered an inflation hedge, it is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding the zero-yield asset. According to economists polled by Reuters, the Fed could raise interest rates at least twice more in coming months with no cut by year-end. Markets now expect Fed's target rate to peak at 5.188% in July, from a current range of 4.5% to 4.75%. "Another weak inflation print could draw an abrupt end to the correction and see gold rally once more, at which point $1,890-$1,900 may provide the initial test," said Craig Erlam, senior market analyst at OANDA in a note.
Among other precious metals, spot silver fell 0.7% to
$21.82 per ounce, platinum was down 0.4% to $950.12 while
palladium fell 0.2% to $1,563.52.
(Reporting by Ashitha Shivaprasad and Seher Dareen in
Bengaluru; editing by Jason Neely, Kirsten Donovan)
