Gold gains on softer dollar as traders await US inflation data

Gold prices advanced on Tuesday after falling over 1% in the previous session, as the dollar eased ahead of key US inflation data.

Spot gold was up 0.5% at $1,999.09 per ounce, as of 0649 GMT. US gold futures rose 0.5% to $2,014.40.

The dollar index was 0.1% lower, making bullion cheaper for overseas buyers.

Investors now awaited the US consumer price data due Wednesday for more clarity on the path of interest rates heading into the Federal Reserve's May policy meeting.

"A hotter-than-expected print may suggest that the Fed could still hike rates once more in May... gold's rally higher has been somewhat excessive... chances of another Fed hike could kind of bring the overshoot down," said OCBC FX strategist Christopher Wong.

A US employment report released on Friday pointed to a tight labor market and raised bets of an interest rate hike by the US central bank next month. Markets are pricing in a 69.4% chance of a 25 basis-point increase, according to the CME FedWatch tool.

The opportunity cost of holding the non-yielding bullion rises when interest rates are raised to bring down inflation.

Minutes of the Fed's March 21-22 policy meeting will also be scanned on Wednesday.

"Near-term, there are also bearish technical setups for a corrective move lower" in gold prices, OCBC's Wong added.

Federal Reserve Bank of New York President John Williams said on Monday that financial system troubles that drove the central bank to provide large amounts of credit to banks were not collateral damage from the Fed's aggressive effort to lower inflation.

Data on Tuesday showed top bullion consumer China's March consumer inflation hit the slowest pace since September 2021 and suggested demand weakness persisted amid an uneven economic recovery.

Spot silver rose 0.3% to $24.97 per ounce, platinum gained 1.1% at $1,002.83 and palladium climbed 1.8% to $1,436.87.

Reuters