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Gold prices ease as traders fret about interest rates

March 6, 2023By Reuters

Gold prices ticked lower on Monday as central banks indicated further interest rate hikes to tame stubbornly high inflation, diminishing the metal’s appeal.

Spot gold was down 0.1% at USD 1,853.92 per ounce, as of 0708 GMT, after climbing to its highest since February 15 earlier in the session. US gold futures rose 0.3% to USD 1,859.60.

Higher interest rates discourage investors from placing money in non-yielding assets such as gold.

“More sustained moves (in gold) may be driven by hard data – US non-farm payroll, where a weaker-than-expected figure will be looked upon to push back against January’s strong labour data as a one-off,” said Yeap Jun Rong, a market analyst at IG.

Investors are awaiting US Federal Reserve Chair Jerome Powell’s testimony to Congress on Tuesday and Wednesday, and the February payrolls report on Friday for monetary policy clues.

San Francisco Fed President Mary Daly said on Saturday if data on inflation and the labour market continued to come in hotter than expected, interest rates would need to go higher, and stay there longer. Richmond Fed President Thomas Barkin said on Friday he could see US rates in the 5.5%-5.75% range.

Data on Friday showed the US services sector grew at a steady clip in February, with new orders and employment rising to more than one-year highs.

“We see a trading range of USD 1,775-USD 1,900 as we expect to see the March Federal Open Market Committee meeting to come across as more hawkish than investors are hoping for,” Edward Meir, a metals analyst at Marex, wrote in a monthly note.

Underlying inflation in the euro zone will stay high in the near term, so a 50 basis-point rate increase later this month is increasingly certain, European Central Bank President Christine Lagarde said.

Spot silver was down 0.1% at USD 21.22 per ounce, platinum slipped 0.4% to USD 973.66 and palladium lost 0.7% to USD 1,443.04.

(Reporting by Kavya Guduru in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)

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