Gold nears one-month high as investors await US inflation data

Bengaluru — Gold prices hovered on Wednesday near their highest level in more than a month, supported by a weaker dollar with investors awaiting US inflation data, which is expected to influence the pace of Federal Reserve rate hikes.

Spot gold held its ground at $1,793.39 per ounce as of 3.18am GMT, after hitting its highest since July 5 at $1,800.29 on Tuesday. US gold futures were down 0.1% at $1,810.

The dollar index weakened 0.1% against its rivals, making gold less expensive for other currency holders.

“Clearly the focus is on US inflation data. Also, what’s really important is that where prices are currently trading with $1,800 being the very important level here,” said Ilya Spivak, a currency strategist at DailyFX. “If inflation numbers come in stronger than expected, after last week’s solid jobs report, we could see some rate-cut expectations for next year leave the forecast, which would be gold negative.”

Economists polled by Reuters expect US annual inflation to have eased to 8.7% last month from 9.1% in June. Core inflation is expected at 0.5% month-on-month . The data is due at 12.30pm GMT. The Fed hiked rates by 75 basis points (bps) each in June and July to rein in soaring inflation.

Though gold is seen as a hedge against inflation, higher US interest rates dull non-yielding bullion’s appeal. Fed funds futures traders are now pricing for a 67.5% chance of another 75 bps rate increase at the US central bank’s next policy meeting in September.

“Central banks have warned that further rate hikes will be required to tame persistently high inflation. Investors expect July’s consumer price index (CPI) to cool a bit,” ANZ analysts said in a note. “However, strong wage growth and higher labour costs could undermine this.”

Spot silver eased 0.2% to $20.47 per ounce, platinum fell 0.4% to $930.14 and palladium edged 0.1% higher to $2,217.40.

Reuters