Data this week showed
U.S. consumer prices increased above expectations in February and
producer prices also showed some stickiness in inflation.
"Gold has already priced in whatever positive boost it would get from expectations that interest rates are going down... if inflation starts to kick higher again, it means that policymakers are going to have to keep monetary policy more restrictive for longer," said Everett Millman, chief market analyst at Gainesville Coins.
"Although gold does not particularly like a high interest rate environment, if the reasons for interest rates to stay that high is because inflation is running hot... that naturally means people will again turn to gold," Millman added.
Higher-than-expected inflation maintains pressure on the Fed to keep interest rates elevated, weighing on gold. The non-yield-bearing precious metal is also used as a hedge against inflation.
Traders
continue to bet on interest rate cuts in June, although the chances of rates easing in June are seen at 59%, compared with 72% before the CPI data, the
CME FedWatch Tool, opens new tab showed.
The U.S. dollar index
(.DXY), opens new tab headed for its largest weekly gain since mid-January, making gold more expensive for overseas buyers.
"We increase our average gold price forecast for 2024 from $2,090/toz to $2,180/toz, targeting a move to $2,300/toz by year-end," Goldman Sachs wrote in a note.
Spot platinum rose 1.5% to $940.95 per ounce, palladium gained 1.2% to $1,082.61, while silver was up 1.7% at $25.25.