Gold prices dips as dollar gains, investors await US inflation data

By Arundhati Sarkar

(Reuters) - Gold prices slipped on Tuesday as the dollar regained some ground, while investors braced for the U.S. inflation data later this week that could determine the Federal Reserve's future policy path.

Spot gold fell 0.4% to $1,668.50 per ounce by 0844 GMT. Prices hit a three-week peak in the previous session, buoyed by a weaker dollar.

U.S. gold futures shed 0.5% to $1,671.50.

"The U.S. dollar's quest to retain lost ground is prompting a pause in gold following the latter's surge post jobs data," said Han Tan, chief market analyst at Exinity.

The dollar index rose 0.3% higher after hitting a more-than-one-week low on Monday, making bullion more expensive for overseas buyers. [USD/]

Data on Friday showed U.S. unemployment rate in October rose to 3.7%, inducing optimism that the Fed will shift to less aggressive interest rate hikes and helped gold record its best day since March 2020.

This week, investors will keep a close watch on the U.S. inflation print on Thursday, expected to be key in the next Fed rate decision, and Tuesday's midterm elections, which will determine control of the U.S. Congress.

"Further evidence of persistently elevated U.S. inflation that heralds more incoming Fed rate hikes is likely to unwind some of gold's recent gains," Tan said, adding, "gold should catch a strong bid along with other safe havens in the event the elections' results are unclear or contested."

Bullion is considered a hedge against inflation but rising interest rates increase the opportunity cost of holding the asset.

Gold has hit resistance around $1,680, potentially spurring some wait-and-see for a greater catalyst to induce an upward break, said IG market strategist Yeap Jun Rong.

Market participants also kept a close tab on any news surrounding COVID-related curbs in top bullion consumer China. [MKTS/GLOB]

Spot silver dropped 0.9% to $20.58 per ounce, platinum fell 0.3% to $976.08, and palladium slipped about 1% to $1,877.24.

 

(Reporting by Arundhati Sarkar and Ashitha Shivaprasad in Bengaluru; Editing by Janane Venkatraman)