Gold prices remained in a narrow range on Tuesday as investors awaited inflation data that would impact the Federal Reserve’s decisions on interest rates. The yellow metal had been trading in a range of $2,000 to $2,050 an ounce over the past week, as expectations for early interest rate cuts by the central bank diminished. The dollar also strengthened in Asian trade, putting pressure on gold prices, which were holding steady at around $2,020.06 an ounce.
Investors are eagerly awaiting the Consumer Price Index (CPI) data for January, which is expected to show that inflation eased. However, the reading is still likely to remain above the Fed’s 2% annual target, which would give the central bank little incentive to cut interest rates. This situation is not favorable for gold, as higher interest rates increase the opportunity cost of holding bullion, which offers no yield. As a result, gold prices had dropped as the possibility of early rate cuts decreased, and the metal is now trading close to the crucial support level of $2,000 an ounce.
In contrast, copper prices rebounded from a three-month low as concerns over increased supply due to the discovery of a major copper deposit in Zambia eased. The discovery is not expected to lead to an immediate increase in copper supply, and attention has turned to economic data from major economies such as the United States, China, and the Eurozone to provide more insight into copper demand.