WASHINGTON (dpa-AFX) - Gold prices fell sharply on Tuesday as the dollar climbed higher after data showing bigger than expected increase in U.S. consumer prices in the month of January dashed hopes of an early rate cut by the Federal Reserve.
CME Group's FedWatch Tool is currently indicating just an 8.5% chance of a quarter point rate cut in March, while the chances of a quarter point rate cut in early May have fallen to 35.3%.
The dollar, which remained subdued ahead of the inflation data, climbed higher soon after the release of the report from the Labor Department. The dollar index surged to 104.88, gaining nearly 0.7%.
Gold futures for April ended down $25.80 at $2,007.20 an ounce.
Silver futures for March ended lower by $0.613 at $22.154 an ounce, while Copper futures for March settled at $3.7110 per pound, losing $0.0130.
'Gold has crumbled under the pressure of rates staying higher. How much worse it gets for the yellow metal will ultimately depend on how bad the data gets but, under the circumstances, we're certainly back in a 'good news is bad news' scenario ahead of the retail sales data,' says Craig Erlam, Senior Market Analyst at OANDA, UK & EMEA. 'The fairytale scenario of a strong economy, low inflation, and rate cuts now looks a step too far.'
The Labor Department said its consumer price index rose by 0.3% in January after inching up by 0.2% in December. Economists had expected consumer prices to edge up by 0.2%.
While the report also showed the annual rate of consumer price growth slowed to 3.1% in January from 3.4% in December, economists had expected the pace of growth to slow to 2.9%.
Excluding food and energy prices, core consumer prices climbed by 0.4% in January after rising by 0.3% in December. Core prices were expected to increase by 0.3%.
With Federal Reserve officials repeatedly saying they need more 'confidence' inflation is slowing before lowering interest rates, the data has further reduced optimism about a near-term rate cut.
Copyright(c) 2024 RTTNews.com. All Rights Reserved
Copyright RTT News/dpa-AFX
© 2024 AFX News
