Gold prices steadied on Tuesday after hitting a more than two-month high earlier in the session, as investors awaited U.S. inflation data for clues on the Federal Reserve’s interest-rate path.
Spot gold was down 0.4% at $4,369.57 an ounce after hitting its highest level since June 5 earlier at $4,434.84. U.S. gold futures rose 0.2% to $4,430.2.
“The upcoming inflation data will significantly influence the outlook for U,S. interest rates. A hotter-than-expected inflation print could justify the case for an interest rate hike at the Fed’s next meeting and, as a result, put further downward pressure on gold prices,” said Hamad Hussain, a climate and commodities economist at Capital Economics.
Investors are awaiting U.S. consumer price data due on Wednesday and producer price data on Thursday for further clues on the Fed’s policy outlook.
Traders are currently pricing a nearly 50% chance of an interest-rate hike in September, up from 44% on Monday, according to the CME FedWatch tool.
Cleveland Federal Reserve Bank President Beth Hammack said on Monday she believed the time was right to begin raising interest rates gradually so as to avoid the need for sharper increases later.
While gold is seen as a hedge against inflation, it loses its appeal in a high-interest-rate environment because it offers no yield.
U.S. President Donald Trump responded to Iran’s conditions for a peace deal by demanding that Tehran pay compensation for people killed in wars, attacks and protests. The comments added to uncertainty over efforts to reopen the Strait of Hormuz.
“The precious-metals outlook is showing signs of improving, not least underpinned by ongoing structural demand that helped prevent a deeper correction, while the macro environment has become more supportive and Western investors are showing tentative signs of returning,” Saxo Bank analyst Ole Hansen said in a note.
Among other metals, spot silver fell 1.5% to $64.73, platinum lost 0.7% to $1,740.06 and palladium declined 1.4% to $1,363.42.
