Gold gains as traders strap in for US inflation data

By Ashitha Shivaprasad

(Reuters) – Gold prices ticked higher as the dollar eased on Monday, while investors looked toward key U.S. inflation data due this week that could throw some light on the Federal Reserve’s interest rate stance.

Spot gold was up 0.4% at $1,945.25 per ounce by 3:30 p.m. ET (2030 GMT). U.S. gold futures settled 0.6% higher at $1,950.20.

The dollar index was down 0.2%, making gold more expensive for overseas buyers. [USD/]

U.S. consumer prices index (CPI) data will be released on Tuesday. According to a Reuters poll, core U.S. CPI is expected to have risen 0.3% month-over-month in October, with a year-over-year increase of 4.1%. Traders will also scan the U.S. producer price index data due on Wednesday.

If the data shows higher-than-expected inflation, gold will likely pull back as that would raise the possibility of another rate hike, said Bob Haberkorn, senior market strategist at RJO Futures.

“But, if data comes in line, gold will trade north of $1,950.”

Higher interest rates dull non-yielding bullion’s appeal.

The market is pricing in an 86% chance that the Fed will leave rates unchanged in December, according to the CME FedWatch tool.

Bullion dipped 3% last week as safe-haven demand driven by the conflict in the Middle East eased, while Fed Chair Jerome Powell struck a hawkish tone.

“Going forward, in the short term the investor appetite to add length will rely on the extent of (geopolitical) escalation but (gold) will face headwinds from elevated U.S. real rates,” Goldman Sachs said in a note.

“Tactically, we would view a potential selloff in gold as a buying opportunity as we see an environment with elevated risk channels ahead playing into gold’s hedge qualities.”

Rating agency Moody’s on Friday changed the outlook on the U.S. government’s credit rating to “negative” from “stable”.

Spot silver gained 0.3% to $22.29 per ounce.

Platinum climbed 2.8% to $863.03 and palladium added 1.5% at $977.58, set for its best session in three weeks but still hovering near a five-year low.

(Reporting by Ashitha Shivaprasad and Anushree Mukherjee in Bengaluru; Editing by Pooja Desai, Aurora Ellis and Shounak Dasgupta)