Gold prices hold steady as US' inflation data takes centre stage

By Arundhati Sarkar

(Reuters) - Gold prices steadied into a tight range on Tuesday as investors held off on large bets ahead of key U.S. inflation data that could influence the size of future Federal Reserve interest rate hikes.

Spot gold was little changed at $1,726.39 per ounce by 0923 GMT. Prices hit a two-week high of $1,734.99 on Monday as the dollar fell.

U.S. gold futures were down 0.2% to $1,737.00.

This will be the last batch of significant data to be released before next week's Fed meeting and therefore all eyes will be on it, and prices are likely to remain flat until then, said Ricardo Evangelista, senior analyst at ActivTrades.

 

U.S. consumer price data, due at 1230 GMT, is expected to show headline inflation rose 8.1% year-over-year in August versus 8.5% in July. Traders would be on the look out for any signs of cooling as Fed Chair Jerome Powell indicated further tightening to be data dependent.

"A 75-basis-point rate hike (at the Sept. 20-21 policy meeting) is already baked into the value of the dollar, so it is unlikely to significantly impact the greenback and therefore gold," Evangelista said, noting a lower-than-expected inflation number could create scope for gold gains.

Even though gold is seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding the bullion.

The dollar index extended its decline, buoying gold's appetite among overseas buyers. [USD/]

Elsewhere, spot silver was also flat at $19.77 per ounce, having recorded its biggest one-day percentage gain since February 2021 on Monday.

While the rally in silver reflects short-covering by speculative traders, metal is expected to maintain its close relationship with gold, Carsten Menke, analyst at Julius Baer said in a note.

Palladium edged 3.1% lower to $2,196.66, while platinum was unchanged at $907.00.

 

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Krishna Chandra Eluri)