Gold under pressure as dollar, yields rise on Fed uncertainty

Investing.com -- Gold prices edged lower on Tuesday, extending losses from the prior session as uncertainty over the Federal Reserve’s next move and anticipation of a stronger inflation reading this week buoyed the dollar and Treasury yields.

Positioning in the dollar and the bond market increased over the past week, with the greenback rising in anticipation of a consumer price index (CPI) reading on Thursday that is expected to show some signs of sticky inflation. 

Gold saw little investor interest, drifting lower as the outlook for non-yielding assets was dented by the prospect of more raises in interest rates.

Spot gold fell slightly to $1,936.21 an ounce, while gold futures steadied at $1,970.55 an ounce by 20:17 ET (00:17 GMT). 

Fed comments offer mixed outlook on future hikes

Recent comments from Fed officials offered up differing takes on future rate increases by the central bank. Fed Governor Michelle Bowman said on Monday that more rate increases will likely be needed to bring inflation closer to the Fed’s annual target range.

While inflation has eased substantially this year, it has still remained well above the Fed’s target. Core inflation has also remained largely sticky.

On the other hand, New York Fed President John Williams said that he was confident the U.S. economy was moving into a less inflationary environment, and that the Fed was close to hitting peak interest rates during this cycle.

Their comments came ahead of CPI inflation data due on Thursday, which could show some signs of increasing, according to a Reuters poll. Any signs of sticky U.S. inflation give the Fed more headroom to keep raising rates.

The dollar and Treasury yields firmed ahead of the reading, pressuring gold and other metal prices. 

“If Treasury yields rally above last week’s high, that could trigger some technical buying and be very negative for gold prices… this week is all about inflation data and any hot surprises could prove to be short-term bearish for gold,” Ed Moya, senior market analyst at OANDA said in a note.

Copper creeps lower ahead of more Chinese cues

Copper futures fell 0.1% to $3.8357 a pound on Tuesday, also coming under pressure from a stronger dollar in recent sessions. 

Markets are largely focused on key Chinese trade and inflation data this week, which is expected to offer more cues on the world’s largest copper importer. But both readings are expected to signal more weakness in the economy, after it barely grew in the second quarter.

Clear signals on more Chinese government stimulus measures are also in focus, following several promises of more fiscal support from government officials.