Gold Silver Reports → Gold gained in Asia on Tuesday with sentiment on expectations for the path of U.S. interest rates this year they key focus.
On the Comex division of the New York Mercantile Exchange, gold for April delivery rose 0.57% to $1,217.10 a troy ounce.
Silver futures for March delivery gained 0.50% to $15.260 a troy ounce, while copper futures for March delivery eased 0.61% to $2.102 a pound.
Overnight, gold plummeted more than 1% on Monday amid a broadly stronger dollar, as investors continued to digest strong U.S. inflation data from late last week that could bolster the prospects for an interest rate hike from the Federal Reserve in the coming months.
Investors on Monday continued to react to solid U.S. inflation January figures released last week when the Core Consumer Price Index (CPI) accelerated at its highest pace in four years. The Core CPI, which strips out volatile food and energy prices, increased by 1.4% from the prior 12 months last month, rising 0.7% from already strong gains in December. It came as the services component soared 3.0%, due to robust gains in medical care and prescription drug prices, as well as rent and owners’ equivalent rent.
The data likely appeased hawkish members of the Federal Open Market Committee (FOMC), who are in favor of hiking interest rates several times in 2016. Last month, the FOMC considered slowing its pace of tightening, amid persistently sluggish inflation. Long-term inflation has remained under the FOMC’s targeted objective of 2% for every month over the last three years. Following the strong inflation data, the CME Group’s (O:O:CME) Fed Watch tool increased the probability of a single rate hike by the end of its December meeting to 33.2% in Monday’s session. A month earlier, the odds of one rate hike in 2016 stood at 23.7%.
Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.
Also on Monday, traders reacted to the increased likelihood that the U.K. could leave the European Union early this summer, when Britain holds a referendum on its membership in the EU on June 23. On Friday, British prime minister David Cameron reached a deal with leaders from the EU, which provided the U.K. with special status in the European bloc and cleared the way for a vote. Over the weekend, however, London mayor Boris Johnson shockingly backed the so-called “Brexit,” declaring the referendum a “vote for real change.” → Neal Bhai Reports