Gold cedes gains on hawkish Fed; palladium sinks to near 4-year low

Feb 14 (Reuters) – Gold prices gave up gains accrued due to dollar weakness on Tuesday to end the session nearly unchanged as US Federal Reserve officials remained hawkish on rate hikes, while demand concerns sent auto-catalyst palladium sliding to its weakest since August 2019.

Spot gold was nearly flat at USD 1,852.94 per ounce by 2:33 p.m. ET (1933 GMT). US gold futures gained 0.1% to settle at USD 1,851.80.

Data showed US CPI rose 6.4% in the 12 months through January – the smallest gain since October 2021. Last month, CPI increased 0.5%, also in line with expectations.

Gold rose by as much as 0.8% on Tuesday after the dollar fell to a near two-week low, but the currency recovered, making gold more expensive for overseas buyers.

It is still a concern the Fed might feel the need to be more aggressive in hiking rates and fighting inflationary pressures, which will weigh on gold, said David Meger, director of metals trading at High Ridge Futures.

After the CPI data, Richmond Fed President Thomas Barkin and Dallas Federal Reserve President Lorie Logan both said the central bank would need to focus on bringing inflation down to the 2% target.

The Fed is expected to raise its policy rate at least twice more to the 5%-5.25% range, with financial markets retaining about even odds for a further quarter-point hike in the summer.

Bullion is highly sensitive to rising US interest rates, which increase the opportunity cost of holding the zero-yield asset.

Benchmark 10-year Treasury yields rose, weighing on gold.

Palladium dropped 4.2% to USD 1,500.18 per ounce, after earlier touching USD 1,468.94, its lowest since late-August 2019.

“As palladium is being increasingly substituted by platinum and the number of electric cars is growing, less palladium is likely to be needed to produce the new vehicles,” Commerzbank analysts wrote in a note.

Spot silver fell 0.6% to USD 21.84, and platinum slipped 2.3% to USD 931.61.

(Reporting by Seher Dareen and additonal reporting by Bharat Govind Gautam in Bengaluru; Editing by Barbara Lewis and Krishna Chandra Eluri)