Gold struggles below $2,000/Oz as Fed cut bets trimmed

Gold languished near a two-month low on Wednesday, trading below the key $2,000 per-ounce level, after a stronger-than-expected U.S. inflation report dampened expectations for more than three quarter-point rate cuts from the Federal Reserve.

FUNDAMENTALS

* Spot gold was down 0.1% at $1,991.09 per ounce (Oz), as of 0146 GMT, after hitting its lowest since Dec. 13 on Tuesday. Bullion fell about 1.4% on Tuesday in its biggest daily decline since Dec. 4.

* U.S. gold futures fell 0.2% to $2,003.60/Oz.

* U.S. consumer prices increased more than expected in January amid rises in the costs of shelter and healthcare.

* Fed policymakers will probably wait until June before cutting interest rates, traders bet after the U.S. CPI data. Higher interest rates increase the opportunity cost of holding bullion.

* The U.S. dollar index hovered near a three-month peak, while 10-year Treasury yields were near a two-and-half-month high.
* Global stock market indexes dropped on Tuesday, with all three major U.S. stock indexes falling more than 1% each.
* Money markets have factored in about three quarter-point rate cuts this year, down from four cuts before the inflation data. This is in line with the Fed’s rate forecasts, or what is called the “dot plot” released back in December.

* The first Fed rate cut is now expected to come in June, with a 75% probability.

* Trading volume is expected to be thin with markets in China closed for the Lunar New Year holidays.

* Investors will now focus on U.S. retail sales data due on Thursday and producer price index (PPI) numbers due on Friday. At least 5 Fed officials are due to speak this week.

* Spot platinum fell 0.1% to $870.81/Oz, palladium dropped 0.5% to $859.49, and silver slipped 0.2% to $22.03. DATA/EVENTS (GMT) 0630 India WPI Inflation Jan 0700 UK CPI Jan 0700 UK PPI Jan 1000 Euro Zone Industrial Production Dec 1000 Euro Zone GDP Flash Estimate Q4 1430 US Fed’s Goolsbee speaks — 2100 US Fed’s Barr speaks — 2350 Japan GDP Q4.

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