Gold firms as June rate cut bets still intact

GOLD prices edged higher on Wednesday after dropping more than 1 percent in the previous session, as investors digested hotter-than-expected US inflation data and still banked on a Federal Reserve interest rate cut in June.

Spot gold edged up 0,3 percent to US$2 163.12 per ounce, as of 1047 GMT. Bullion posted its worst single-day drop since February 13, 2024 on Tuesday. US gold futures rose 0,1 percent to US$2 168.50.

"The market driver behind the decline of gold is quite clear as the U.S. CPI numbers came in higher than expected," said Carlo Alberto De Casa, market analyst at Kinesis Money.

"It's just a physiological correction after a long strike of positive days and markets are realizing that the Fed will not cut rates too quickly."

Bullion slumped 1,1 percent on Tuesday as data indicated that US consumer prices rose sharply in February, above expectations and indicating some inflation stickiness.

Higher-than-expected inflation means that the US Fed will be under more pressure to keep interest rates higher for longer, weighing on non-yielding assets such as gold.

However, Fed policymakers are still seen starting interest-rate cuts in June, even as a government report showed consumer prices rose last month more than expected.

Traders now see about a 65 percent chance of an interest rate cut from the Fed in June, slightly lower from the 72 percent seen before the data, according to the CME Group's FedWatch Tool.

"While physical gold demand has been holding up well since 2021, a sharp price rally is likely to temper discretionary gold buying in 2024," analysts at ANZ Research wrote in a note.— Reuters