Gold prices ticked higher in Asia on Wednesday with all eyes focused on US consumer price data ahead for fresh cues on the likely path of interest rate hikes by the Fed.
Gold futures for February delivery on the Comex division of the New York Mercantile Exchange rose 0.54% to $1,337.60 a troy ounce. US CPI for January is seen up 0.3% on month and 1.9% on year.
Overnight, gold prices hovered above breakeven supported by ongoing dollar weakness ahead of an inflation report which could strengthen the Federal Reserve’s case for more aggressive monetary policy tightening.
The dollar fell for a second straight day in row pressured by large gains in both the euro and yen, helping gold prices remain steady a day ahead of an inflation report which could offer markets with fresh direction.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – A fall in the dollar makes gold cheaper for holders of foreign currency and thus, increases demand for the precious metal.
Also supporting gold prices was a uptick in demand ahead of the start of the Chinese New Year which usually ushers in gift buying in the form of gold jewellery. The biggest demand for gold is for use in gold jewellery which accounts for roughly 50% of total demand, according to the World Gold Council.