Gold prices edged up on Wednesday but hovered close to recent lows, with a strong U.S. dollar taking some of the precious metal’s shine away.
Spot gold rose 0.2% to $1,854.07 per ounce by 0443 GMT, but the metal was still only about 0.3% off its lowest level since last Friday hit in the previous session. U.S. gold futures gained 0.1% to $1,856.00.
“The macro backdrop is still supportive for gold with inflation still elevated, but the continued strength in the dollar is limiting gold’s upside,” said Harshal Barot, a senior research consultant for South Asia at Metals Focus.
The dollar was close to a 16-month high, supported by data showing U.S. retail sales jumped last month. A stronger dollar raises gold’s cost to buyers holding other currencies
The report suggested high inflation was not yet dampening spending even as worries over rising costs sent consumer sentiment tumbling to a 10-year low in early November.
“The more positive economic data you get, the more bets for faster interest rate hikes are going to increase,” Barot said, adding that the European Central Bank’s (ECB) dovish stance also supported the dollar, adding to bullion’s headwinds.
ECB President Christine Lagarde speaks later on Wednesday, after saying on Monday that tightening monetary policy now to rein in inflation could choke off the euro zone’s recovery.
Gold, often viewed as an inflation-hedge, has benefited from easy monetary policy during the pandemic, but any hike in rates should reduce bullion’s appeal as higher interest rates raises the non-interest bearing metal’s opportunity cost.
Elsewhere, spot gold may retest a support at $1,849 per ounce and a break below that could cause a fall to $1,831, according to Reuters technical analyst Wang Tao.
Spot silver rose 0.6% to $24.94 per ounce. Platinum gained 0.3% to $1,064.30 and palladium was up 0.2%at $2,161.75.