Gold prices retreat as dollar resumes uptick; US inflation data eyed

Gold prices reversed course and fell on Tuesday as the dollar resumed strengthening, while investors shifted their attention to U.S. inflation data for cues on the Federal Reserve's monetary policy strategy.

Spot gold was down 0.4% at $1,845.89 per ounce by 12:50 p.m. EDT (1650 GMT), after rising as much as 0.6% earlier in the session. U.S. gold futures fell 0.8% to $1,844.30.

The dollar index gained 0.2%, holding near a 20-year high in the previous session. Meanwhile, benchmark 10-year U.S. Treasury yields retreated from their near four-year peaks. [USD/] [US/]

"Initially, gold was showing signs it was possibly stabilizing, but investors are still nervous ahead of inflation data on how aggressive the Fed will be," said Edward Moya, a senior analyst with OANDA.

"The dollar strength is hurting gold... Even though we see a pause in the bond market sell-off, it seems clear that investors will not immediately jump back into gold," he added.

Investors await the U.S. consumer price index (CPI) data due on Wednesday to gauge its likely impact on the Fed's rate hike plans.

The Fed's aim of bringing inflation down without derailing the economy is challenging but doable amid heightened uncertainty caused by the war in Ukraine and COVID-19 pandemic, New York Fed President John Williams said.

"Williams' comments reflect a little pull back from the hawkishness (with regards to) the rate hikes moving forward," said Bob Haberkron, RJO Futures senior market strategist.

Gold is considered a hedge against inflation and economic uncertainties. However, it is highly sensitive to rising U.S. interest rates, which raise the opportunity cost of holding non-interest bearing bullion.

Spot silver fell 0.8% to $21.61 per ounce, platinum gained 1.3% to $968.05 and palladium fell 1.8% to $2,058.94.