Gold falls on firmer dollar as US data takes spotlight

Gold prices dropped on Wednesday, hurt by a stronger US dollar as investors focused on key inflation data from the world’s largest economy for clues on the size of the Federal Reserve’s potential interest-rate cut in September.

Spot gold was down 0.8% at USD 2,505.03 an ounce by 01:41 p.m. ET (1741 GMT), having slipped as much as 1.1% earlier in the session. US gold futures settled 0.6% lower at USD 2,537.80.

The dollar climbed 0.6%, making gold more expensive for other currency holders.

“We’re seeing a little pressure coming from a bit firmer dollar. And at this point, we’re waiting for further information to drive this market either one direction or the other based on that inflationary data,” said David Meger, director of metals trading at High Ridge Futures.

“So what we’re seeing here is profit-taking consolidation ahead of that report.”

Investors are now looking out for chip giant Nvidia’s quarterly earnings due later in the day and US personal consumption expenditure (PCE) data due on Friday.

If Friday’s PCE numbers come in lower than expected, it could boost expectations of a more dovish Fed, creating upside potential for gold, said Ricardo Evangelista, senior analyst at ActivTrades in a note.

Markets are pricing in about a 63.5% chance of a 25-basis points US rate cut in September and a 36.5% chance of a 50-bps cut, according to the CME FedWatch tool.

Gold ETFs saw modest net inflows of 8 metric tons (USD 403 million) last week, led by North American funds, according to the World Gold Council.

Elsewhere, China’s net gold imports via Hong Kong rose 17% in July, marking the first increase since March, data showed on Tuesday.

China is a major consumer of gold, and this uptick in gold demand could support global gold prices.

Among other precious metals, spot silver fell 2.5% to USD 29.24 an ounce, platinum slipped 2.1% to USD 933.90 and palladium was down 2.6% at USD 944.58.

(Reporting by Anushree Mukherjee in Bengaluru, additional reporting by Polina Devitt; Editing by Shreya Biswas)