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Gold prices fell sharply on Wednesday as the U.S. dollar strengthened following the release of Tuesday’s U.S. consumer price index report showing inflation falling only slowly, suggesting the Federal Reserve will need to raise borrowing costs further.
Price action
-
Gold futures for April
GC00,
-1.06% GCJ23,
-1.06%
fell by $20, or 1%, to $1,846 per ounce on Comex. -
Silver futures for March
SI00,
-1.52% SIH23,
-1.52%
declined by 34 cents, or 1.6%, to $21.53 per ounce. -
Palladium for March
PAH23,
-1.17%
delivery retreated by $15.20, or 1%, to $1,451 per ounce, while platinum for April
PLJ23,
-1.28%
declined by $11, or 1.2%, to $928 per ounce. -
Copper for March
HGH23,
-1.74%
declined by 6 cents, or 1.5%, to $4.015.
Market drivers
The U.S. dollar advanced following the release of Tuesday’s U.S. CPI data as the numbers were generally hotter than expected, prompting traders to position for the possibility that the Federal Reserve could push its policy interest rate past 5%.
“While inflation is clearly on a downward trend in the U.S., Tuesday’s figure showed the pace at which consumer prices are rising hasn’t slowed as much as the market was anticipating,” said Rupert Rowling, a market analyst at Kinesis Money.
“This readjustment of how many more rate hikes the Fed is set to implement has prompted the price of gold to tumble as the prospect of interest rates rising diminishes the appeal of the precious metal, as it doesn’t generate a yield for its holders, with other interest-bearing assets favored instead.”
The ICE U.S. Dollar Index, a gauge of the dollar’s strength against a basket of rivals, rose 0.5% to 103.71. Investors are now looking ahead to the release of U.S. retail sales data for January.
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