Gold dips as wary investors await US inflation data

Bengaluru — Gold prices edged lower on Monday, with cautious investors’ focus on a key US inflation reading as it could influence the size of the Federal Reserve’s next interest rate hike.

Spot gold was down 0.2% at $1,712.69 per ounce, by 5.41am. US gold futures were down 0.3% at $1,723.20.

“There remains some lingering general deleveraging downward pressure on gold, but this week’s inflation number may provide some relief,” said Clifford Bennett, chief economist at ACY Securities. “A further indication that inflation may have peaked would be encouraging for the gold market. The Fed will continue to hike regardless, but that there may be some end in sight could be enough to tilt gold back up following recent sharp declines.”

The US consumer price index data, due on Tuesday, is expected to show that August prices rose 8.1% over the year, compared with an 8.5% print for July.

Fed officials on Friday ended their public comment period ahead of the central bank’s September 20-21 policy meeting, with strong calls for another oversized rate increase to battle sky-high inflation. The markets are largely expecting the Fed to raise rates by 75 basis points this month.

Higher interest rates increase the opportunity cost of holding the non-yielding bullion and boosts the dollar, in which gold is priced.

The dollar index held close to a more than one-week low hit on Friday.

Meanwhile, European Central Bank policymakers see a heightened risk that they will have to hike their key interest rate to 2%, sources said.

Spot gold is biased to break a resistance at $1,720 and rise towards $1,729, according to Reuters technical analyst Wang Tao.

Spot silver rose 0.3% to $18.83 per ounce, after touching a more than two-week high earlier. Platinum dropped 0.8% to $873.68 and palladium fell 0.6% to $2,159.31.