Gold eases from one-month peak as focus turns to U.S. inflation

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Gold prices slipped on Wednesday from a

more than one-month high due to an uptick in bond yields, while

investors awaited U.S. inflation data which is expected to

influence the pace of Federal Reserve rate hikes.

Spot gold was down 0.3% at $1,789.29 per ounce, as of

0512 GMT, after hitting its highest since July 5 at $1,800.29 on

Tuesday. U.S. gold futures fell 0.3% at $1,806.10.

Benchmark U.S. 10-year Treasury yields edged

higher to 2.7990%, increasing the opportunity cost of holding

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non-interest bearing gold.

“Clearly the focus is on U.S. 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 the inflation number come in stronger than expected,

following last week’s solid jobs report, we could see some of

rate cut expectations for next year leave the forecast, which

would be gold negative.”

Economists polled by Reuters expect U.S. 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 1230 GMT.

The Fed hiked rates by 75 basis points each in June and July

to rein in soaring inflation. Although gold is seen as a hedge

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against inflation, higher U.S. interest rates dull non-yielding

bullion’s appeal.

Fed funds futures traders are now pricing for a 69.5% chance

of another 75-basis-point rate increase at the U.S. 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 to cool a bit,” ANZ analysts said in

a note.

“However, strong wage growth and higher labor costs could

undermine this.”

Spot silver fell 0.5% to $20.40 per ounce, platinum

dipped 0.8% to $926.48, and palladium slipped 0.5%

to $2,204.55.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu

Sahu, Sherry Jacob-Phillips and Uttaresh.V)