Gold dips as investors watch for US data

Bengaluru — Gold prices ticked lower on Tuesday, as cautious investors awaited US inflation data to get clues on how aggressive the Federal Reserve needs to be in raising interest rates.

Spot gold fell 0.2% to $1,721.49 an ounce by 3.02am GMT. Prices had hit a two-week high at $1,734.99 in the previous session as the dollar fell. US gold futures were down 0.5% at $1,732.

“There are expectations for inflation to become a lot softer and that could help gold actually run a little bit further as expectations could then be for less aggressive Fed hikes after the September meeting,” said Matt Simpson, senior market analyst at City Index.

However “a more volatile move will come if we don’t see that happen and that’s where you could see gold really come under pressure. For us to be confident that bulls have regained control, we probably need to see gold break above $1,740”, Simpson said.

US consumer price data, due at 12.30pm GMT, is expected to show headline inflation rose 8.1% year-over-year in August versus 8.5% in July. The reading puts focus on the Fed’s meeting next week.

A Reuters poll of economists expects the central bank to deliver another 75-basis point interest rate hike and hold its policy rate steady for an extended period once it eventually peaks. Even though gold is seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding bullion, while it boosts the dollar in which the precious metal is priced.

On the day, the dollar index was steady near a two-week low. Spot silver fell 0.8% to $19.62 an ounce, having recorded its biggest one-day percentage gain since February 2021 on Monday.

Platinum slipped 0.7% to $900.94 and palladium shed 3.6% to $2,184.67 after falling as much as 3.8% earlier.