Gold firms with focus on U.S. inflation data, central bank cues

“The U.S. inflation data on Friday is going to be critical ... if we see another reading this month that the inflation is falling more slowly than expected that could really dampen sentiment once more.

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New York: Gold inched up on Monday, led by a slight pullback in the dollar, with investors watching out for U.S. inflation data and top central bank meetings to shed light on the path of interest rate hikes.

Spot gold rose 0.27% to $1,855.40 per ounce by 1211 GMT, after nearing a one-month high of $1,873.79 on Friday.

U.S. gold futures were up 0.4% at $1,857.40.

The dollar slipped, making bullion cheaper for holders of other currencies.

“It seems the market has paused a little bit waiting for the next major driver,” said Craig Erlam, senior market analyst at OANDA.

“The U.S. inflation data on Friday is going to be critical … if we see another reading this month that the inflation is falling more slowly than expected that could really dampen sentiment once more.

Bullion is viewed as a hedge against inflation, although higher interest rates raise the opportunity cost of holding gold which yields no interest.

The U.S. consumer price index is forecast to have risen to 0.7% in May after rising 0.3% in April.

Gold’s gains despite expectations of further Fed rate hikes in the next few months seem to confirm strong investor interest, Carlo Alberto De Casa, external market analyst at Kinesis said.

“The bearish impulse which pulled down the price to a low below $1,800 in middle May, seems to be over,” De Casa added.

The European Central Bank (ECB) meets on Thursday, while the Fed and Bank of England meetings are due next week.

Investors have ramped up their bets on ECB’s rate hikes this year, and priced in a bigger 50 basis-point hike by October

Gold may retest resistance at $1,867, according to Reuters technical analyst Wang Tao.

Silver climbed 2.2% to $22.40 per ounce, palladium jumped 2.3% to $2,021.88 and platinum rose 1.5% to $1,029.56.

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