Gold prices edged up on Tuesday with focus on the U.S. inflation readings for hints on future U.S. Federal Reserve rate strategy as economic uncertainties prevailed.
Spot gold rose 0.5% to $2,030.43 per ounce by 1021 GMT, while U.S. gold futures added 0.2% to $2,037.90.
While the expectation of a Fed rate cut “is a bit too optimistic and early”, gold could consolidate around $1,980-$2,060 in the short term, said Carlo Alberto De Casa, external analyst at Kinesis Money.
For the time being, markets are in a “wait and see” mode as the Fed is going to take the U.S. consumer price index (CPI) data due on Wednesday into account in their rate decision, De Casa added.
While bullion is considered an inflation hedge, higher rates dent the non-yielding asset’s appeal.
Traders are currently pricing in an 88% chance of the U.S. central bank holding rates in June, after Fed Chair Jerome Powell said last week that policy decisions will be data driven, while also hinting at a likely pause in the cycle.
U.S. consumers’ inflation expectations were mixed in April, the New York Federal Reserve’s report showed.
Traders are also monitoring developments surrounding the country’s banking sector and its debt ceiling.
Separately, Commerzbank analyst Carsten Fritsch said in a note that there is no scope for the Fed to implement rate cuts this year and gold is therefore likely to remain above the $2,000-mark.
Indicative of investor sentiment, holdings in the top SPDR gold trust exchange-traded fund hit their highest since Oct. 18 at 937.55 tonnes as of May 8, having seen net inflows of over 11 tonnes so far this month.
In other precious metals, platinum rose 0.6% to $1,076.77 per ounce, palladium added 0.4% to $1,559.74.
Spot silver was flat at $25.56.
