Gold dips as investors await US inflation data

Bengaluru — Gold prices inched lower on Tuesday, as investors braced for the US inflation data that could offer clues on the Federal Reserve’s timeline to start tapering stimulus measures meant to aid economic recovery from the pandemic.

Spot gold eased 0.2% to $1,790.66 an ounce by 3.37am GMT, while US gold futures fell 0.1% to $1,791.90.

A modest acceleration in inflation reinforces the idea that the Fed is more likely to make a formal announcement that a taper is imminent, said DailyFX currency strategist Ilya Spivak.

“The reaction from gold is going to be negative because the prospect of reducing stimulus is something that bids up yields,” Spivak said.

Higher treasury yields translate into higher opportunity cost for holding non-interest bearing bullion.

US consumer price data is due at 12.30pm GMT. Economists expect core CPI, an index which strips out volatile energy and food prices, to have risen 0.3% in August from July.

The data comes before the policy meeting by the Federal Reserve on September 21-22, when markets will keep a close eye on the central bank’s announcement on when it will start winding up its pandemic-era bond-buying programme.

US central bank officials are keeping a close watch on inflation expectations as they try to evaluate whether the pricing pressures will pass or have more lasting effects on the economy.

The dollar index was steady after hitting a two-week high on Monday.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.2% to 1,000.21 tonnes on Monday from 998.17 tonnes on Friday.

Silver fell 0.3% to $23.65 an ounce, platinum dipped 0.2% to $958.73 and palladium rose 0.3% to $2,094.16.