Picture: ISTOCK
Picture: ISTOCK

Bengaluru — Gold prices crept lower on Tuesday as investors waited for US consumer price data due later in the day to gauge the outlook for inflation and the Federal Reserve’s rate hike stance.

Spot gold dipped 0.1% to $1,321.34 an ounce at 3.59am GMT. US gold futures for April delivery rose 0.1% to $1,321.60/oz.

The dollar index, which measures the dollar against a basket of currencies, was up 0.1% at 89.977, recovering from an earlier dip.

"Gold traders are adopting a more neutral stance…. While a March hike is fully priced in, traders usually get a bit anxious awaiting the Fed statement and key forward guidance," said Stephen Innes, head of Asia-Pacific trading at Oanda.

"We should expect interest rate uncertainty to weigh on prices over the short term."

The US government is expected to release consumer price index (CPI) data at 12.30pm GMT, a key focus for the day.

The median forecast by economists polled by Reuters points to annual core CPI inflation of 1.8% in February, which would be flat from January.

A higher reading could stoke expectation that the Federal Reserve will raise interest rates four times, rather than three times, this year.

Higher interest rates increase the opportunity cost for nonyielding bullion.

Any outcome above expectations would put gold under pressure, said Richard Xu, a fund manager at HuaAn Gold, China’s biggest gold exchange-traded fund.

In the longer term, Xu expected gold to be range bound this year, although an expected slowdown in the Chinese economy will provide support.

In February, growth in China’s manufacturing sector cooled to the weakest in more than one-and-a-half years, raising concern about a sharper than expected slowdown in the world’s second-biggest economy this year as regulators tighten the screws on financial risks.

Spot gold looks neutral in a range of $1,318-$1,327 and an escape could suggest a direction, Reuters Technical analyst Wang Tao says.

In other precious metals, silver rose 0.2% to $16.52/oz.

Platinum fell 0.4% to $959/oz, while palladium remained unchanged at $978.50/oz.