Gold prices steady from new year’s losses, inflation data awaited

Investing.com-- Gold prices rose slightly in Asian trade on Tuesday, recovering from a rough start to the year as markets reassessed expectations for early interest rate cuts by the Federal Reserve before key U.S. inflation data due this week.

The yellow metal fell sharply below the $2,050 an ounce level over the past week, tracking a rebound in the dollar as strong labor market data brewed uncertainty over just how much impetus the Fed has to begin loosening policy early.

But gold prices saw some relief this week as the dollar fell from three-week highs, amid some profit-taking. Still, the yellow metal remained well below highs hit in December.

Spot gold rose 0.2% to $2,032.91 an ounce, while gold futures expiring in February rose 0.3% to $2,038.85 an ounce by 00:07 ET (05:07 GMT).

US inflation data awaited for more rate-cut cues

Traders remained heavily biased towards the dollar ahead of key consumer price index data due this Thursday. The reading is expected to show a mild pick-up in inflation in December which, coupled with the strong nonfarm payrolls reading, gives the Fed more headroom to keep rates higher for longer.

This spurred some trimming in expectations for early interest rate cuts, which in turn saw gold give up some gains made in December. The yellow metal still ended 2023 with a 10% gain.

Fed officials also pushed back against expectations for early interest rate cuts. Atlanta Fed President Ralph Bostic said that with inflation still well above the Fed’s 2% annual target, he remained biased towards policy staying tight in the near-term.

While Bostic still expects rates to eventually fall in 2024, he flagged only about 50 basis points of cuts- much smaller than what markets are expecting.

Traders were also seen steadily trimming bets that the Fed will begin cutting rates by as soon as March. The CME Fedwatch tool now showed traders pricing in a 59.4% chance for a March cut, down from 64% seen on Monday and 70.7% seen a week ago.

Higher-for-longer rates bode poorly for gold, given that they push up the opportunity cost of investing in the yellow metal, which offers no yield.

Copper treads water amid dollar pressure, China anticipation

Among industrial metals, copper prices moved little on Tuesday amid pressure from a strong dollar, while anticipation of key economic readings from top importer China also kept traders wary of the red metal.

Copper futures expiring March rose 0.2% to $3.8288 a pound. They had fallen over 2% in the first week of 2024.

Apart from the U.S. data, focus this week is also on Chinese inflation and trade figures for December, due on Friday. The world’s biggest copper importer is expected to have remained in disinflation in December, while trading activity- particularly its exports- are expected to have also fallen.

But despite overall economic weakness, China’s copper imports remained surprisingly resilient through most of 2023. Data on Friday is expected to show whether this trend continued in December.

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