Gold retreats as cautious investors eye central banks' next move

Gold retreats as cautious investors eye central banks' next move
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BENGALURU (Nov 15): Gold prices eased on Monday (Nov 15), slipping from a more than five-month peak hit in the previous session, as cautious investors assessed if rising inflation would prompt a more aggressive response by central banks.

Spot gold fell 0.3% to US$1,858.73 (about RM7,731.39) per ounce by 0444 GMT, while US gold futures dropped 0.5% to US$1,859.30.

"Until it breaks above US$1,875 to US$1,880, gold should be capped by a stronger dollar, higher short-term US Treasury yields and a possible move higher in longer-term yields if the Fed (US Federal Reserve) starts to hint they are going to raise rates sooner," said Stephen Innes, a managing partner of SPI Asset Management.

The US dollar index edged 0.1% lower but was not far off a 16-month high hit last Friday. A stronger dollar tends to weigh on bullion as it increases the metal's cost to buyers holding other currencies.

Minneapolis Federal Reserve Bank president Neel Kashkari said on Sunday he expects higher inflation over the next few months but warned that the US central bank should not overreact to elevated inflation as it is likely to be temporary.

His remarks echoed comments from two European Central Bank (ECB) policymakers last Friday that suggested the ECB should not withdraw stimulus too quickly despite inflation likely falling slower than previously thought.

"Inflation numbers have provided a boost to gold. However, prices could trend lower towards US$1,700 over the course of 2022 as rising inflation will likely mean that central banks speed up the pace of monetary tightening," said Warren Patterson, the head of commodities strategy at ING.

Interest rate hikes tend to reduce non-interest bearing gold's appeal as it raises the metal's opportunity cost.

Market participants await Tuesday's US retail sales data for signs that higher inflation could weigh on consumption after consumer sentiment hit its lowest in a decade.

Spot silver fell 1.3% to US$24.97 per ounce. Platinum fell 1.2% to US$1,069.54 and palladium was down 1.2% to US$2,084.50.