Gold clings to lows as investors buckle up for US inflation data

Gold prices hovered near one-month lows on Thursday, as investors braced for the make-or-break U.S. inflation data that would shape the Federal Reserve's upcoming interest rate decisions.

Spot gold edged up 0.2% at $1,918 per ounce by 0337 GMT, but hovered near its lowest level since July 10 hit on Wednesday. U.S. gold futures were flat at $1,950.80.

U.S. consumer price index (CPI) data, due at 1230 GMT, is expected to show inflation slightly accelerated in July.

"While it is widely expected for U.S. headline to bounce on y/y terms, the focus is on core. Any larger-than-expected downside drag could help to reinforce the disinflation trend and provide some support for gold prices," said OCBC Executive Director and FX Strategist Christopher Wong.

Gold is usually considered a hedge against inflation, but rate hikes raise the opportunity cost of holding non-yielding bullion.

Traders expect an 86.5% chance of no rate hike at the Fed's next policy meeting in September, and expect the central bank's next move to be a rate cut, likely in spring of next year. (FEDWATCH)

"Outlook for gold would regain shine when markets move in to price in greater probability of rate cuts and U.S. dollar softness. And this hinges on how entrenched the disinflation trend is," Wong added.

Reflecting investor interest in bullion, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, on Wednesday said its holdings fell to the lowest level since March.

However, providing some underlying support to bullion were fears of renewed tensions between the world's biggest economies after U.S. President Joe Biden on Wednesday signed an executive order that will prohibit some new U.S. investment in China in sensitive technologies.

Among other precious metals, spot silver was steady at $22.67 an ounce, platinum rose 0.3% to $890.87 and palladium gained 0.3% to $1,238.63.

Cre: REUTERS