Gold pulls back, traders hunker down for more cues on interest rates

Gold retreated on Thursday as focus returned to chances of U.S. interest rates staying higher for longer, with traders also positioning for economic data that could influence the Federal Reserve’s policy path.

Spot gold fell 0.5% to $2,306.69 per ounce by 1:48 p.m. ET (1748 GMT). U.S. gold futures for June delivery settled 0.1% lower at $2,309.6.

“Given the sticky inflationary environment and the relative strength of the dollar, we’ve seen some pressure on the gold market over the course of the last couple weeks,” said David Meger, director of alternative investments at High Ridge Futures. “We believe this pullback has not yet run its course.”

The U.S. Federal Reserve held interest rates steady on Wednesday while signaling that it continued to lean towards eventual reductions in borrowing costs. However, it flagged a “lack of further progress” on inflation.

The Fed’s preferred inflation measure – the Personal Consumption Expenditures Price Index – increased at a 2.7% annual rate in March, an acceleration from the prior month.

Market attention has now turned to the U.S. non-farm payrolls report, due on Friday, and an “extremely strong jobs number” could see the outlook for rate cuts pulled back even further, Meger said.

While gold is traditionally considered a hedge against inflation, high interest rates to tame rising prices can increase the opportunity cost of holding non-yielding bullion.

Jim Wyckoff, senior market analyst with Kitco, attributed Thursday’s gold moves to normal chart consolidation after Wednesday’s gains, which were based on notions that the Fed’s statement was not quite as hawkish as some had feared.

Spot silver rose 0.1% to $26.66 per ounce, while spot platinum gained 0.8% to $957.50 per ounce. Meanwhile, spot palladium slipped 1.3%, to $937.02 per ounce.