Gold hits fresh 9-month high as inflation wanes

Gold prices advanced to fresh nine-month highs on Tuesday as expectations for smaller U.S. interest-rate hikes helped bolster the yellow metal while weighing on the dollar.

Price action
  • Gold for February delivery 
    GCG23,
    +0.16%

    GC00,
    +0.16%
    rose $8.50, or 0.4%, to $1,937 per ounce on Comex.

  • Silver for March
    SI00,
    -0.21%

    SIH23,
    -0.21%
    delivery gained 21 cents, or 0.9%, to $23.70 per ounce.

  • March Palladium
    PAH23,
    -0.23%
    advanced by $2.60, or 0.2%, to $1,704 per ounce, while April platinum
    PLJ23,
    +0.09%
    gained $2, or 0.2%, to $1,058 per ounce.

  • Copper for March
    HGH23,
    -0.43%
    fell by 1 cent, or 0.2%, to $4.25 per pound.

Market drivers

Precious metals analysts credited signs of waning U.S. inflation with helping to boost the price of gold by making it easier for the Federal Reserve to pause its interest-rate hikes, or even switch back to cutting rates.

“With the U.S. dollar on the backfoot, inflation rates around the world coming down and the Fed more likely to tone down its hawkish rhetoric rather than ratchet it up, gold has been enjoying a strong revival over the past three months,” said Raffi Boyadjian, lead investment analyst at XM. “As long as inflation continues to come down and not prove sticky, gold’s uptrend should continue.”

The U.S. dollar
DXY,
-0.02%
weakened against major currencies Tuesday, causing the ICE U.S. Dollar Index to fall by 0.1% to 102.09. The yield on the 10-year note
TMUBMUSD10Y,
3.518%
fell by 1.2 basis points to 3.510%. Treasury yields move inversely to prices.

The annual rate of U.S. inflation fell for the sixth month in December to 6.5% from 7.1%, according to the latest consumer-price index, released earlier this month.

The latest producer-price index, released last week, showed U.S. wholesale prices sank 0.5% in December mostly due to cheaper food and gasoline, extending a string of low readings and adding further proof that inflation is fading.

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