Gold holds above $1,800 on U.S. asset tapering uncertainty

by Jonathan Adams
Gold

Spot gold was steady at $1,802.92 per ounce, after reaching a one-week peak of $1,808.50 on Tuesday

Gold stayed above the key psychological level of $1,800 on Wednesday, as a lower-than-expected increased in U.S. inflation figures led to uncertainty over the timeline of asset tapering by the U.S. central bank.

Spot gold was steady at $1,802.92 per ounce as of 0318 GMT, after reaching a one-week peak of $1,808.50 on Tuesday.

With the CPI data coming in a bit lower than expected, for some that does push a possible taper announcement a little bit further down the road and that should be fairly supportive for gold prices, said ING analyst Warren Patterson.

Consumer Price Index (CPI) was up just 0.1% last month, compared with an expected rise of 0.3%. That was the smallest gain in six months suggesting that inflation had probably peaked, though it could remain high for a while amid persistent supply constraints.

The data has thrown a level of uncertainty over the Federal Reserve’s taper timeline as it is due to hold a two-day monetary policy meeting next week.

A growing number of policymakers have suggested the Fed could start scaling back asset purchases this year.

Towards the end of this year we see gold prices down at $1,700. Once we get that taper announcement, all attention turns to when the Fed is going to start hiking rates, Warren added.

Higher interest rates raise the opportunity cost of holding gold, which pays no interest.

The CPI data weighed on the dollar index, while the benchmark U.S. 10-year yield hit its lowest reading since Aug. 24 on Tuesday.

Elsewhere, silver dropped 0.3% to $23.76 per ounce.

Platinum hit a more than nine-month low of $926.26 and was last down 0.4% at $935.52.



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