Gold lingers near 2-month high as focus turns to US inflation data

Gold prices hovered near a two-month peak on Tuesday, supported by a softer dollar and U.S. bond yields, as investors awaited key U.S. inflation data to gauge the Federal Reserve's next move on rate hikes.

Spot gold was little changed at $1,824.15 per ounce by 0624 GMT, about $3 shy off a two-month peak scaled earlier in the session. U.S. gold futures were flat at $1,828.10.

A subdued dollar and lower benchmark 10-year Treasury yields kept bullion's appeal intact.

A weaker dollar reduces bullion's cost for buyers holding other currencies, while lower yields decrease non-interest bearing bullion's opportunity cost.

"A rise through $1,825 could trigger a technical pattern that could take gold back to the $2,000 zone," said

Jeffrey Halley

, senior market analyst at OANDA.

"However, this will rely on the dollars downside correction persisting for longer and the narrative around central bank keeping interest rates low for longer to remain intact."

Focus is now on Wednesday's

Consumer Price Index inflation data

that could test the Fed's stance on rate hikes, as tightness in the labour market combined with global supply chain issues could result in another high reading.

It also comes on the heels of several Fed officials expressing growing concerns over more persistent price increases.

But Fed Vice Chair Richard Clarida and Chicago Fed President Charles Evans suggested a rate hike was not yet on the cards.

Gold has benefited from near-zero interest rates introduced during the pandemic as they reduce bullion's opportunity cost.

"I wouldn't expect anything imminent from the Fed but an above-consensus CPI could make the market's anticipation of a 2022 rate hike more likely", Nicholas Frappell, a global general manager at ABC Bullion said, adding that such a scenario would be potentially negative for gold.

Spot silver fell 0.3% to $24.37 per ounce.

Platinum

eased 0.5% to $1,050.60 and palladium dropped 0.8% to $2,053.71.