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Gold Retreats From New Record Before Pivotal US Inflation Print

Gold pared gains after setting a fresh record above $2,350 an ounce, as investors shifted focus to a key US inflation reading later this week.
Bloomberg
By Bloomberg
8 Apr
Inside a Gold and Silver Refinery In IndiaUnmarked gold bars at a gold and silver refinery operated by MMTC-PAMP India Pvt. Ltd., in Nuh, India, on Wednesday, 31 August 2022.

Higher Treasury yields weighed on bullion during US trading hours as the precious metal pays no interest. Earlier, gold rose as much as 1% as traders assessed where policymakers now stand on the timing of their pivot to lower borrowing costs, ahead of Wednesday’s March inflation data. The Federal Reserve expects to cut this year, but needs to see more evidence that inflation is easing first. Higher rates are typically negative for gold.

Bullion remains supported well above $2,300 after notching a series of fresh all-time highs in recent weeks. Yet, the move has left some onlookers puzzled amid a lack of any obvious trigger for the sudden rally that began in mid-February — especially as traders unwound bets for steep rate cuts during that period.

Read More: The Gold Market Hunts for Answers Behind Bullion’s Sudden Surge

Gold is up more than 16% since then, with at least some of the gains fueled by optimism that the Fed was getting closer to cutting rates. Central bank demand has also been a factor, with the People’s Bank of China reporting an addition for a 17th straight month in March.

Bullion Retreats From Fresh Record | Traders await a slew of US data later this week

Elsewhere, bullion has benefited from increased haven demand amid persistent tensions in the Middle East. Israel said Sunday the country is removing some troops from southern Gaza after Prime Minister Benjamin Netanyahu said victory was within reach. Iran is preparing a response to a suspected Israeli attack on its consulate in Syria, while Hezbollah warned that it’s ready for war.

UBS Group AG boosted its year-end gold outlook by 11% to $2,500 an ounce, with a revival in demand for bullion-backed exchange-traded funds set to support another leg up when the Fed cuts rates around mid-year, according to a note from analysts including Giovanni Staunovo.

Still TD Securities sees a potential reversal in bullion prices given “the excess demand related to safe-haven buying” in the absence of further escalations in the Middle East, senior commodity strategist Daniel Ghali said in a note.

Spot gold was 0.1% lower at $2,326.91 an ounce as of 10:52 a.m. in New York, after earlier touching a record $2,353.95. The Bloomberg Dollar Spot Index was little changed. Silver, platinum and palladium rose.

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