Gold eases from one-month peak as focus turns to US inflation

Aug 10 (Reuters) – Gold prices slipped on Wednesday from a more than one-month high due to an uptick in bond yields, while investors awaited US inflation data which is expected to influence the pace of Federal Reserve rate hikes.

Spot gold was down 0.3% at USD 1,789.29 per ounce, as of 0512 GMT, after hitting its highest since July 5 at USD 1,800.29 on Tuesday. US gold futures fell 0.3% at USD 1,806.10.

Benchmark US 10-year Treasury yields edged higher to 2.7990%, increasing the opportunity cost of holding non-interest-bearing gold.

“Clearly the focus is on US inflation data. Also, what’s really important is that where prices are currently trading with USD 1,800 being the very important level here,” said Ilya Spivak, a currency strategist at DailyFX.

“If the inflation number come in stronger than expected, following last week’s solid jobs report, we could see some of rate cut expectations for next year leave the forecast, which would be gold negative.”

Economists polled by Reuters expect US annual inflation to have eased to 8.7% last month from 9.1% in June. Core inflation is expected at 0.5% month-on-month. The data is due at 1230 GMT.

The Fed hiked rates by 75 basis points each in June and July to rein in soaring inflation. Although gold is seen as a hedge against inflation, higher US interest rates dull non-yielding bullion’s appeal.

Fed funds futures traders are now pricing for a 69.5% chance of another 75-basis-point rate increase at the US central bank’s next policy meeting in September.

“Central banks have warned that further rate hikes will be required to tame persistently high inflation. Investors expect July’s consumer price index to cool a bit,” ANZ analysts said in a note.

“However, strong wage growth and higher labour costs could undermine this.”

Spot silver fell 0.5% to USD 20.40 per ounce, platinum dipped 0.8% to USD 926.48, and palladium slipped 0.5% to USD 2,204.55.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu, Sherry Jacob-Phillips and Uttaresh.V)