Gold flat despite strong dollar and higher yields

Bengaluru — Gold prices settled into a holding pattern on Tuesday as investors awaited US inflation figures that could provide an updated view on interest rates after the US Federal Reserve kept the door open for further policy tightening.

Spot gold was flat at $1,922.30 an ounce by 3.06am GMT, while US gold futures eased 0.1% to $1,946.10.

Market activity is likely to be broadly subdued until US consumer price index (CPI) data is out on Wednesday, which could provide guidance on US interest rates after a widely expected pause by the Fed next week.

“A CPI number coming in in-line or even slightly higher would likely place some short-term pressure on gold,” said Nicholas Frappell, global head of institutional markets at ABC Refinery.

Americans’ overall views on inflation were little changed in August, even as they predicted higher prices for essentials such as rent and food, the New York Fed reported on Monday.

Markets are pricing in a 93% chance of the Fed holding rates steady at their September 19-20 policy meeting, but there is a 41% chance of a hike in November, according to CME’s FedWatch tool. Demand for non-interest-bearing gold could take a hit if the Fed further raises US interest rates to quell inflation.

Capping gold’s gains, the US dollar index gained some lost ground ahead of the CPI data.

“From a broad perspective, gold prices have continued to hold up relatively well amid the multi-month trend of a stronger US dollar and higher US long-term yields,” JPMorgan analysts said in a note, though a sustained push higher in gold prices is likely to need to be catalysed by an eventual turn towards a Fed cutting cycle, they added.

Elsewhere, spot silver rose 0.4% to $23.16, platinum gained 0.3% to $901.02 and palladium added 0.3% to $1,221.83.