Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London. File Picture: REUTERS/NEIL HALL
Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London. File Picture: REUTERS/NEIL HALL

Bengaluru — Gold prices firmed on Wednesday as investors awaited the October consumer inflation data from the US for potential hints on the Federal Reserve’s monetary tightening policy.

Spot gold was up 0.1% at $1,281.73 an ounce at 3.51am GMT.

On Tuesday, gold touched $1,270.56, its lowest since November 6, before recovering to close about 0.2% higher.

US gold futures for December delivery slipped 0.1% to $1,281.80.

"Gold is still stuck in a tight range as traders are waiting for additional signals before taking any view," ANZ analyst Daniel Hynes said.

He said the US consumer inflation data was one of the most important factors that could dictate sentiment in the run-up to the next Fed monetary policy meeting.

"Obviously, a rise in inflation is what the market is looking for … but for now it is taking a cautious approach," Hynes said.

The Federal Reserve should keep its benchmark interest rate at current levels until there is an upswing in inflation, St Louis Fed president James Bullard said on Tuesday.

One of the newest Fed policymakers, Raphael Bostic, said he still backed a December increase, and would need to see further weakness in US inflation and local signs of economic weakness to cause him to shelve expectations for gradual policy tightening.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding nonyielding bullion.

Reuters technical analyst Wang Tao said spot gold looked neutral in a range of $1,270-$1,286 and an escape could suggest a direction.

"A number of other markets have been similarly range-bound," INTL FCStone Edward Meir said in a note.

"We suspect traders have moved to the sidelines as they wait to see what happens to the tax bill where expectations for its passage have in turn led to significant strengthening in both the dollar and US equity markets."

US Senate Republicans on Tuesday linked repealing a key component of Obamacare to their ambitious tax-cut plan, raising new political risks and uncertainties for the tax measure that financial markets have been monitoring closely for months.

The dollar index, which tracks the US currency against a basket of six major rivals, held steady at 93.802.

In other precious metals, silver gained 0.2% to $17.045 an ounce.

Platinum was up 0.3% at $928/oz. Palladium, which touched a two-week low of $974.97/oz in the previous session, edged 0.2% higher to $987.75.