Gold treads water in anticipation of more Fed cues

By Ambar Warrick

Investing.com -- Gold prices were pinned just above six-week lows on Tuesday, with traders holding off big bets in anticipation of more cues on monetary policy from the minutes of the Federal Reserve’s February meeting.

Markets were also awaiting a slew of Fed speakers this week, as overheated U.S. inflation and strength in the jobs market put the central bank‘s policies squarely in focus.

Gold and other metal markets saw limited trade so far this week, with U.S. markets closed for a holiday on Monday. But demand for the dollar persisted in Asian and European trade, keeping a lid on bullion prices.

Spot gold was flat at $1,841.59 an ounce, while gold futures moved little at $1,850.25 an ounce by 20:32 ET (01:32 GMT). Both instruments were nursing three straight weeks of losses.

Hotter-than-expected U.S. inflation readings swiftly cut short a recent rally in gold prices as markets drastically reassessed their expectations for interest rate hikes this year.

Stubborn inflation, coupled with signs of strength in the jobs market, gives the Fed enough impetus to keep raising interest rates. The minutes of the Fed’s February meeting, due on Wednesday, are likely to reiterate the central bank’s hawkish stance.

A spike in U.S. Treasury yields and the dollar weighed heavily on non-yielding assets such as gold and other metals. With U.S. yields set to rise even further in tandem with interest rates, the near-term outlook for gold appeared dim, as some Fed officials warned that U.S. interest rates could rise past 6% this year.

Still, gold and other precious metals could benefit from safe-haven buying later in the year, especially if slowing economic growth forces the Fed into reversing its hawkish policy.

Other precious metals were muted on Tuesday. Platinum futures rose 0.2% to $929.40 an ounce, while silver futures fell 0.2% to $21.780 an ounce.

Among industrial metals, copper prices fell slightly on Tuesday after rallying 1.5% in the prior session, amid sustained optimism over a recovery in China.

High-grade copper futures fell 0.1% to $4.1730 a pound.

Optimism over a Chinese economic recovery surged on Monday after the People’s Bank held its benchmark mortgage rates at historical lows. While the move was largely expected, it signaled that the government intends to keep policy accommodative to shore up economic growth.