By Myra P. Saefong and Mark DeCambre
Gold futures pulled back on Tuesday after touching highs above the key $1,900 an ounce level, prompting prices to suffer their first loss in three sessions.
Some firmness in the U.S. dollar created friction for bullion Tuesday, and attempts by investors to propel the asset solidly above a $1,900-an-ounce threshold, seen as a level of resistance for prices, failed.
With bond traders unsure what to expect in Thursday’s U.S. consumer price index data, “it’s no surprise to find $1,900 proving a tough psychological level for gold to break above,” Adrian Ash, director of research at BullionVault, told MarketWatch.
Thursday’s U.S. inflation report may provide the clearest impetus for commodity traders in the form of May consumer-price index. A hotter-than-expected read on the April CPI, which rose 4.2% year over year, temporarily rattled markets last month.
Another elevated U.S. CPI report could increase bets of a more rapid unwind of the Federal Reserve’s easy-money measures, which were implemented at the height of the COVID-inspired market turmoil in March of 2020 and have been supportive for gold.
On Tuesday, August gold /zigman2/quotes/210034565/delayed GC00 +0.61% fell by $4.40, or 0.2%, at $1,894.40 an ounce, after trading as high as $1,906.90. Prices for the most-active contract haven’t settled above $1,900 since Wednesday, which was the highest finish since early January.
On Thursday, in addition to the CPI data, investors may watch for policy guidance from the European Central Bank, which is slated to update its monetary policy plans, a week before the Fed’s two-day meeting that kicks off June 15.
“Gold’s recovery from March’s double-low was dramatic, too fast perhaps,” said Ash. “The 10% surge pulled lots of hot money into Comex futures and options, but it left physical demand and [exchange-traded fund] inflows quiet.”
The gold-backed SPDR Gold Shares ETF /zigman2/quotes/200593176/composite GLD -0.09% on Tuesday traded 0.4% lower.
Meanwhile, the market is paying close attention to Treasury Secretary Janet Yellen’s recent comments on interest rates and how inflation could be good for economy, said Jeff Wright, chief investment officer at Wolfpack Capital.
In an interview with Bloomberg News on Sunday, Yellen said higher interest rates would be “a plus” for policy makers.
The difficulty is inflation is “extremely hard to contain” in a low interest rate environment, said Wright. And “a meaningful rise in interest rates would dramatically curtail economic growth,” so that would be a “difficult needle to thread.”
Rounding out action on Comex, prices for July copper edged up by nearly 0.7% to $4.56 a pound. July platinum lost almost 1.1% to $1,162.50 an ounce and September palladium settled at $2,807 an ounce, down 1.1%.