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PRECIOUS-Gold flat as investors strap in for aggressive U.S. rate hike

PRECIOUS-Gold flat as investors strap in for aggressive U.S. rate hike

Reuters · 09/14/2022 00:08
PRECIOUS-Gold flat as investors strap in for aggressive U.S. rate hike

Core U.S. CPI surges 0.6%

Dollar holds firm after marking best day since March 2020

Recasts, adds comment, updates prices

By Eileen Soreng

- Gold prices were flat on Wednesday, after falling more than 1% in the previous session, as surprisingly stronger U.S. inflation data fuelled expectations that the Federal Reserve will continue hiking interest rates aggressively and bolstered the dollar.

Spot gold XAU= was flat at $1,701.70 per ounce as of 0331 GMT. Prices saw their biggest one-day percentage decline since July 14 on Tuesday.

U.S. gold futures GCv1 were down 0.4% at $1,710.40.

The stronger-than-anticipated have "cemented the likelihood for a jumbo-sized rate hike at the (Fed) meeting that we're going to see week," said DailyFX currency strategist Ilya Spivak.

A hawkish FOMC could prompt gold to significantly shift lower, even below the $1,600 figure, Spivak said.

U.S. Labor Department data showed on Tuesday the headline Consumer Price Index edged up 0.1% last month versus expectations for a 0.1% decline, while core inflation surged 0.6%.

The data has stoked expectations that the Fed could raise U.S. borrowing costs faster and further than previously expected.

Nomura's economists said they believe a 100 basis-point rate hike is the most likely outcome at the Sept. 20-21 meet.

The dollar index =USD, which measures the currency against six major peers, was steady after recording its biggest one-day percentage gain since March 2020 overnight. USD/

Benchmark U.S. Treasury yields US10YT=RR hovered close to a three-month peak touched on Tuesday. US/

Even though gold is seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding the bullion while boosts the dollar, in which the precious metal is priced.

Spot silver XAG= dipped 0.2% to $19.28 per ounce and platinum XPT= rose 0.5% higher to $880.67.

Palladium XPD= fell 0.8% to $2,088.36, having fallen 7.1% in the previous session its biggest one-day percentage drop since June 13.

(Reporting by Eileen Soreng in Bengaluru; editing by Uttaresh.V)

((eileen.soreng@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 80 6749 6131; Reuters Messaging: eileen.soreng.thomsonreuters.com@reuters.))