Gold ticks down by 0.2% as US inflation data eyed for Fed rate cues

By Deep Kaushik Vakil

(Reuters) - Gold inched lower on Tuesday due to a slight uptick in the dollar, although prices held a narrow range ahead of a widely watched U.S. inflation print that could provide more clarity on the Federal Reserve's interest rate trajectory.

Spot gold was down 0.2% to $1,918.72 per ounce by 1016 GMT, while U.S. gold futures dipped 0.3% to $1,941.70.

The dollar gained 0.2% against its rivals ahead of U.S. consumer price index (CPI) data due on Wednesday, making gold more expensive for other currency holders. [USD/]

The CPI data could exceed forecasts as energy costs have risen, said Quantitative Commodity Research analyst Peter Fertig, which "would dampen a little bit the speculation that the Fed is done for this year with interest rate hikes." [O/R] [NGA/]

Headline U.S. inflation climbed 0.6% in August, according to a Reuters poll, compared with a 0.2% rise in the prior month.

Higher interest rates tend to dull non-yielding bullion's shine, with traders currently betting on a roughly 40% chance of a rate hike in November after a widely expected pause by the Fed next week, according to the CME FedWatch tool.

Americans' overall views on inflation were little changed in August, the New York Fed reported Monday.

Also on the radar, a rate decision by the European Central Bank is due on Thursday with markets slowly increasing their bets on an additional hike.

"Europe's economy is definitely facing a lot of challenges so eventually safe-haven demand will emerge if investors see that the currency is going to be under pressure," said Harshal Barot, a senior consultant at Metals Focus.

The euro zone economy will grow slower than previously expected this year, the European Commission forecast on Monday, as the biggest economy Germany slips into recession.

Elsewhere, spot silver fell 0.2% to $23.02 per ounce, platinum eased 0.2% to $896.61 and palladium shed 0.2% to $1,214.84.

 

(Reporting by Deep Vakil in Bengaluru; Editing by David Holmes)