Gold holds ground as investors brace for US inflation data

Shafaq News / Gold prices flitted in a narrow range on Tuesday ahead of U.S. inflation data, which investors will scrutinise for clues on the Federal Reserve's policy path.

Spot gold was up 0.3% at $2,027.08 per ounce, as of 0520 GMT. Prices traded in a tight range of about $8.

U.S. gold futures were unchanged at $2,033.90.

U.S. consumer price index (CPI) data is due on Wednesday.

If the inflation report comes in hot and fans worries of another Fed rate hike in June, gold prices could eventually drop to the $1,950-$1,920 level, said Ajay Kedia, director at Mumbai-based Kedia Commodities.

Bullion is considered an inflation hedge, but higher rates dent the non-yielding asset's appeal.

However, traders are currently pricing in a 92% chance of the U.S. central bank holding rates at their current level in June.

U.S. consumers' inflation expectations were mixed in April, the New York Federal Reserve's report showed.

Besides economic data, market participants are also monitoring developments surrounding the country's banking sector and its debt ceiling.

Fed survey data on Monday showed in the latest indication that higher interest rates were starting to bite in the finance sector.

"If there is news of further stress in the banking sector, we will see gold move towards the $2,100 level," Kedia said.

Treasury Secretary Janet Yellen said on Monday that a failure by Congress to raise the $31.4 trillion federal debt limit would cause a huge hit to the U.S. economy and weaken the dollar as the world's reserve currency.

Spot silver added 0.3% at $25.65 per ounce.

Platinum rose 0.4% to $1,074.55, while palladium fell 0.1% to $1,552.32.

Although platinum prices might see a short-term correction, overall price risk is to the upside, analysts at Heraeus Precious Metals said in a note.

"With automotive demand showing strength, the risk of supply underperformance underpins a tight market throughout this year."

(Reuters)