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U.S. retail sales rose 3% in Jan vs. 1.8% rise est.
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Dollar scales over one-month peak
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Palladium at lowest since August 2019
(Updates prices)
By Seher Dareen
Feb 15 (Reuters) - Gold prices dropped to their lowest
in over a month on Wednesday, weighed down by a stronger dollar
as better-than-expected U.S. economic data raised worries the
Federal Reserve could hike interest rates further.
Spot gold fell 1% to $1,835.39 per ounce by 2:53 p.m.
ET (1953 GMT). U.S. gold futures settled 1.1% lower at
$1,845.30.
U.S. retail sales rose 3% in January over the previous
month, highlighting economic resilience despite higher borrowing
costs.
Higher retail sales were "another indication that if the Fed
wants to cool inflation, they're going to have to raise interest
rates to choke off some of this demand," said Jim Wyckoff,
senior analyst at Kitco Metals.
This comes after data on Tuesday showed the U.S. consumer
price index had increased year-on-year by 6.4%. That was down
from 6.5% in December, but above the 6.2% estimated by
economists.
Following the U.S. data, the dollar index rose to an
over one-month high, making gold more expensive for buyers using
other currencies. "In case of a re-acceleration of inflation and a return to
more rapid interest rate increases, gold and silver would
suffer," said Carsten Menke, head of Next Generation Research at
Julius Baer.
"In contrast, gold and silver would benefit if the Fed
started to reduce interest rates due to strengthening signs of
recession."
Also weighing on gold, Fed officials said earlier this week
the U.S. central bank will need to keep raising interest rates
gradually.
The yellow metal is considered an inflation hedge, yet
rising interest rates increase the opportunity cost of holding
the non-yielding asset.
Markets are now pricing a peak above 5.2% and traders are
becoming less sure that cuts are coming in 2023. Rates currently
stand at 4.5% to 4.75%. Spot silver dropped 1% to $21.63 per ounce, platinum was down 1.8% to $914.34 and palladium fell 2.1%
to $1,465.80.
(Reporting by Seher Dareen and additional reporting by Bharat
Govind Gautam in Bengaluru; Editing by Anil D'Silva and Krishna
Chandra Eluri)
