Gold firms as dollar eases, focus on Fed cues

Offering some respite to gold, the dollar index eased 0.2%

Gold rose on Thursday on a slight pullback in the dollar but investor caution surrounding the Federal Reserve’s interest rate strategy and other economic cues that may influence it kept bullion hemmed in a relatively tight range.

Spot gold rose 0.4% to $1,946.58 per ounce by 0937 GMT after shedding 1% in the previous session. U.S. gold futures rose 0.2% to $1,961.50.

Offering some respite to gold, the dollar index eased 0.2%, but was still close to its highest in nearly three months.

The upside for gold is likely to be limited ahead of next week’s US CPI report and Fed meeting, said Michael Hewson, chief market analyst at CMC Markets, adding a weak CPI report could prompt a rebound in prices towards the $1,980 levels.

Other analysts have also said gold was likely to be rangebound ahead of the U.S. consumer inflation print on June 13 and the Fed meeting on June 13-14.

Gold needs to hold technical support at about $1,920 for a possible return to the $2,000 levels, Hewson added.

Economists polled by Reuters see the Fed pausing on interest rates for the first time in more than a year at its meeting.

The CME’s Fedwatch tool, meanwhile, pegged chances of a pause next week at about 64.4%, and a 51% chance of a rate increase in July.

Higher interest rates dull the appeal for zero-yield bullion.

”Even if there is a pause at the next meeting, there are likely to be further rate hikes as inflation remains at extreme levels,” said Clifford Bennett, chief economist at ACY Securities.

Capping gold’s upside, benchmark U.S. Treasury yields held close to a two-week high.

Silver jumped 1% to $23.69 per ounce, platinum was little changed at $1,018.61 while palladium dipped 1.1% to $1,373.37.