May 11, 2022 04:05AM ET
By: AnalysisWatch
Gold prices recovered from a three-month low on Wednesday as the dollar and Treasury yields weakened ahead of the release of key monthly inflation data from the U.S., which could influence the Federal Reserve's monetary policy stance and impact demand for gold.
At 3:29 AM ET, spot gold was 0.6% higher at $1,849.245 per ounce, having earlier fallen to the lowest level since Feb. 11. U.S. gold futures were up 0.2% at $1,846.40.
Yields on 10-year U.S. Treasury bonds declined for a third straight session, boosting demand for zero-interest gold.
The dollar weakened, albeit at high levels, making gold more attractive to overseas buyers.
Analysts expect a sharp drop in the monthly increase in the U.S. consumer price index (CPI) for April, to be released at 08:30 AM ET, to 0.2% from 1.2% the previous month and an annual increase of 8.1%.
Federal Reserve officials on Tuesday reiterated their case for the fastest series of rate hikes since at least the 1990s to fight inflation.
Gold is at critical price support around $1,830, and if inflation turns out to be weaker than expected, prices could pick up, with investors prioritizing the data's impact on the Fed over gold's role as a hedge, according to Ilya Spivak, currency strategist at DailyFX.
If inflation is on track or even rises slightly, which is the main risk, gold could break through the $1,800 level and possibly head for the next big test at $1,680, Spivak added.
Rising U.S. short-term interest rates are increasing the opportunity cost of owning gold.
Spot silver increased 1.6% to $21.59 per ounce, platinum increased 1.8% to $981.40, and palladium increased 0.8% to $2,082.46 per ounce.
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