Gold gains on softer dollar, yields; US inflation data in focus

July 11 (Reuters) – Gold prices edged higher on Tuesday, helped by a pullback in the dollar and bond yields as investors looked forward to U.S. inflation data that could offer more cues on the Federal Reserve’s rate hike path.

Spot gold was up 0.4% at $1,932.09 per ounce as of 11:31 a.m. EDT (1531 GMT), set for a third consecutive session of gains. U.S. gold futures gained 0.3% to $1,937.20.

Making gold cheaper for holders of other currencies, the dollar index (.DXY) was down 0.1%, after hitting its lowest level since May 11 earlier in the session. Benchmark 10-year U.S. Treasury yields also slipped.

“If we have a soft inflation reading, it will be positive for gold and prices might go up to $1,950. I think it will be tough for gold to break below $1,900 level on a hot report,” said Edward Moya, senior market analyst at OANDA.

“There are concerns that central banks might tighten this economy in to a much harder recession. Rate hikes are not going to break gold’s back, but it might kill the economy. So there is some support for gold due to this reason.”

All eyes are on U.S. consumer prices data due on Wednesday, which is expected to show prices cooled on an annual basis in June.

However, markets are pricing in a 25-basis-point rate hike from the Fed later this month after last week’s jobs report pointed to a resilient U.S. economy. FEDWATCH

Gold is used as a safe investment during times of political and financial uncertainty, but higher interest rates increase the opportunity cost of holding non-yielding bullion.

Spot silver fell 0.1% at $23.10 per ounce, platinum eased 0.1% to $925.88, and palladium slipped 0.4% to $1,234.98.

“In the very long term, silver is expected to trade significantly above the $26/oz mark and should increasingly decouple from gold,” TD Securities wrote in a note.

Reporting by Brijesh Patel and Ashitha Shivaprasad in Bengaluru. Editing by Jane Merriman and Shilpi Majumdar

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