Gold pares losses on weak US data despite interest rate hike expectations

NEW YORK/LONDON — Gold prices pared losses on weakerthan-expected US economic data on Tuesday, after falling 1% on renewed expectations of an increase in US interest rates next month that pushed the dollar higher.

Spot gold was down 0.20% at $1,235.85 an ounce by 3:23 p.m. EST (2023 GMT), but has gained more than 7% since the start of the year. US gold futures settled down 0.02% at $1,238.90.

The dollar strengthened after Federal Reserve members pointed to the potential for higher US rates next month, making commodities priced in the currency more expensive for non-US buyers.

Bullion rebounded above its lows after data showed the US Purchasing Managers Index ( PMI) was at 53.9 in February, down from 55.6 in January and expectations for 55.8.

“The Fed was pretty hawkish on the weekend but the PMI was lower than expected,” said Bob Haberkorn, senior market strategist for RJO Futures in Chicago.

“It’s kind of known the Fed’s going to do something in March but it’s like gold is second guessing that a bit.”

LOOKING FOR SIGNS

Traders are focused on speeches by a number of Federal Reserve presidents, looking for clues on the timing of US rate rises, and were awaiting the release of minutes from the Federal Reserve’s Jan. 30-Feb. 1 meeting, on Wednesday at 2 p.m. EST (1900 GMT).

“Gold is capped by the likelihood that US monetary policy will be tighter at some stage, potentially in March,” Societe Generale Analyst Robin Bhar said.

“There is a lot of political uncertainty, there are safe haven flows going into gold.”

Mr. Bhar added that gold is also an investment hedge against corrections in what look to be over-valued equities.

Stock prices around the world climbed to record highs on news euro zone business activity accelerated to its swiftest pace in six years.

“Gold’s resilience is all the more impressive considering that US equities are setting record after record, while the dollar is also fairly strong,” INTL FCStone Analyst Edward Meir said.

Support is down to a “myriad political and economic uncertainties” that lie ahead in 2017, Meir added. Also on the radar is President Donald J. Trump’s address to Congress on Feb. 28, which analysts and traders hope will offer details on infrastructure spending and tax cuts.

Elsewhere, silver fell 0.40% to $ 17.94 an ounce, platinum lost 0.30% to $ 997.95 and palladium gained 0.60% to $ 776.75. —