(Bloomberg) — Gold held on to gains on Tuesday, recovering after a sharp drop last week that came in the wake of a hawkish shift from the Federal Reserve, as the market awaited fresh clues on the inflation outlook.
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On Monday, Fed officials stressed that they want to avoid unnecessary disruptions to the U.S. economy as they prepare to start raising interest rates, suggesting little appetite for an aggressive 50 basis-point move in March.
Read: Fed Officials Stress Not Jamming Brakes on Economy as Hikes Loom
The market will have a close eye on the U.S. jobs report for January, out on Friday, for clues on the trajectory for inflation. After bullion fell 2.4% last week, the biggest weekly decline since August, it gained 0.3% on Monday.
“Gold’s rebound may have gone too far already,” Edward Moya, senior markets analyst at Oanda Corp., said in a note, adding that traders were likely to sell into rallies as long as a Fed rate hike looms on the horizon. The U.S. central bank’s rate-cut focus will be the “constant theme that will disrupt any safe-haven flows that stem from geopolitical concerns or Chinese weakness,” he said.
Spot gold was little changed at $1,797.08 an ounce as of 11:29 a.m. in Sydney. Silver was also steady, platinum slightly higher, while palladium fell. Markets in China and some other Asian countries will be closed for much of the week for the Lunar New Year holidays.
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