Gold holds steady near 3-week low as markets weigh quicker Fed hikes

Jan 10: Gold was flat on Monday, hovering near a three-week low, as traders awaited December U.S. inflation data that could reinforce the case for earlier-than-expected interest rate hikes by the U.S. Federal Reserve after weaker jobs data.

FUNDAMENTALS

* Spot gold was little changed at $1,795.11 per ounce by 0234 GMT, after hitting its lowest since Dec. 16 of $1,782.10 on Friday. U.S. gold futures were down 0.2% at $1,794.00.

* U.S. Treasury yields surged last week, following the minutes of Fed policy meeting, which suggested an earlier-than-expected rate hike and the possibility that the Fed may reduce its balance sheet sooner than many have anticipated.

* Gold is considered a hedge against higher inflation, but the metal is highly sensitive to rising U.S. interest rates which increase the opportunity cost of holding non-yielding bullion.

* Fed funds futures have priced an almost 90% chance of a rate hike in March and a more than 90% chance of another one by June.

* U.S. December core CPI was expected to have risen 5.4% annually after climbing 4.9% in November.

* U.S. nonfarm payrolls rose by 199,000 jobs last month amid worker shortages, lower than a forecast of 400,000, with moderate job gains expected in the near term as spiralling COVID-19 infections disrupt economic activity.

* An uptick in retail appetite for physical gold prompted dealers in India to charge premiums last week, while upcoming Lunar New Year festivities brightened the outlook for sales in Singapore.

* U.S.-Russia talks over rising tension in Ukraine also have traders on the edge, as the two sides seem far apart and failure risks an armed confrontation on Europe’s doorstep.

* Spot silver was flat at $22.29 an ounce, platinum rose 0.1% to $956.10, and palladium shed 0.3% to $1,927.25.