Gold stays below $2000 in early Wednesday trade

Gold prices hovered around a two-month low, trading below the crucial $2,000 per ounce level on Wednesday, as traders reduced bets for further rate cuts by the Federal Reserve in response to a stronger-than-expected U.S. inflation report, Reuters reported.

Spot gold was trading at $1,991.50 an ounce (Oz), as of 0655 GMT,

On Tuesday, the price of gold dropped 1.4 per cent, marking the largest daily loss since Dec. 4.

U.S. gold futures declined by 0.1 per cent to $2,004.30/Oz.

Kelvin Wong, a senior market analyst for Asia Pacific at OANDA told Reuters that gold was under pressure after the U.S. inflation report revealed consumer prices increased more than anticipated in January, delaying the anticipated date of the first Fed rate cut as well as the quantity of cuts that were observed by year’s end.

Moreover, The CPI increased 3.1 per cent annually on Tuesday’s data, beating estimates of a 2.9 per cent increase.

Because the Federal Open Market Committee’s announcement of three-quarter point rate cuts in 2024 coincided with the December meeting, which sparked a gold rally, Wong said that $1,975/Oz is the next important support level for spot gold.

Following the Federal Reserve’s “dot plot,” which was made public in December, traders have reduced their bets from four quarter-point rate cuts for 2024. It’s possible that the Fed won’t lower interest rates until June.

The 10-year Treasury yield was close to a 2-1/2-month high, and the U.S. dollar index was at or near a three-month high.

Investor attention will now turn to producer price index figures due on Friday and U.S. retail sales data due on Thursday. This week, at least five Federal Reserve officials are scheduled to speak.

Silver slipped 0.4 per cent to $21.99/Oz.

Spot platinum ticked 0.1 per cent higher to $872.56.

Palladium fell 0.2 per cent to $862.32.