Gold price drifts higher ahead of key U.S. CPI print

Gold price edged higher ahead of key U.S. inflation reading

After reaching a three-week low in the previous session, gold prices experienced an upturn on Tuesday, buoyed by a weaker dollar in anticipation of crucial U.S. inflation data and major central bank policy meetings that could offer insights into interest rates.

As of 0946 GMT, the spot gold price saw a 0.2% increase, reaching $1,984.39 per ounce, while U.S. gold futures rose by 0.3% to $1,999.60.

The dollar edged 0.3% lower against its counterparts, rendering gold more affordable for holders of other currencies.

The optimism generated by an upbeat U.S. jobs report last week tempered expectations of a potential Federal Reserve interest rate cut as early as March.

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U.S. inflation: Key CPI reading due today

The U.S. Consumer Price Index (CPI) report, scheduled for 1330 GMT, is anticipated by economists polled by Reuters to reveal flat headline inflation for November and steady core inflation at an annual rate of 4%, well above the Federal Reserve’s 2% target.

The Federal Open Market Committee's two-day monetary policy meeting is set to conclude on Wednesday with the release of its interest rate decision and summary economic projections. The Fed is widely expected to maintain rates within the 5.25%-5.50% range this week, with a 77% chance of a rate cut in May 2024, according to the CME FedWatch Tool. Lower interest rates typically provide support to non-interest-bearing bullion.

Other noteworthy events that may influence the price of gold include policy meetings at the European Central Bank and the Bank of England on Thursday.

Gold price forecast: Heraeus sees gold between $1,800 and $2,250 in 2024

In its recently released gold price forecast for 2024, German technology firm Heraeus wrote that the price of gold will likely increase when the Federal Reserve initiates interest rate cuts next year:

“Interest rates may have reached their peak. Less than two years after the Fed initiated its aggressive policy action, it is becoming more likely that the rate hike to 5.25-5.50% in July is the last of this cycle. Interest rate futures markets are pricing in up to 90 bp of interest rate cuts in the US and 80 bp in the Eurozone for 2024. As rates are cut, US yields are likely to fall in tandem, which should be positive for the gold price. Although central bankers are generally erring on the side of a ‘higher-for-longer’ policy, they may be forced to cut rates sooner than they expect if economic conditions worsen in H1’24. An early cut to rates could give gold more impetus to rally to new highs.

When the Fed initiates cuts to interest rates, the gold price is expected to move higher as the dollar weakens and yields fall. Gold is forecast to trade between $1,880/oz and $2,250/oz, although, if the euro strengthens as anticipated, the gains will be greater in dollar terms than in euros”.

The price of silver recorded a 0.4% rise to $22.88 per ounce, while platinum gained 1% to $918.69, and palladium climbed 1.2% to $968.39 per ounce.

At the time of writing, the December 2023 gold futures contract on the NYMEX traded around the $2,002 mark, as per MarketWatch data.

The price of gold remains close to 9.5% up year-to-date as of December 12.