Gold holds steady on lower yields, with focus on US inflation data

Aug 9 (Reuters) – Gold prices were flat on Tuesday as dollar and Treasury yields fell, while investors looked forward to US inflation data later this week that could offer more clarity on the Federal Reserve’s rate hike path.

FUNDAMENTALS

* Spot gold were flat at USD 1,786.86 per ounce, as of 0112 GMT, after rising 0.8% in the previous session.

* US gold futures were steady at USD 1,804.70.

* The dollar index moved further away from a one-week peak hit post Friday’s blockbuster US jobs report, making gold less expensive for other currency holders.

* Benchmark US 10-year Treasury yields dipped to 2.7554%, reducing the opportunity cost of holding non-interest bearing gold.

* Markets are looking ahead to US inflation data for July, which will be released on Wednesday. Analysts polled by Reuters expect annual inflation to have eased to 8.7% in July from 9.1% in June.

* Fed funds futures traders are now pricing for a 64.5% chance of another 75-basis-point rate increase at the US central bank’s next policy meeting in September to combat soaring inflation.

* Although gold is seen as a hedge against inflation, higher US interest rates dull non-yielding bullion’s appeal.

* US consumers’ expectations for where inflation will be in a year and three years, respectively, dropped sharply in July, a New York Federal Reserve survey showed on Monday, indicating US central bankers are winning the fight.

* China announced new military drills around Taiwan on Monday, eliciting concern from US President Joe Biden, a day after the scheduled end of Beijing’s largest exercises to protest last week’s visit to the island by US House Speaker Nancy Pelosi.

* Spot silver eased 0.1% to USD 20.63 per ounce, platinum fell 0.1% to USD 938.99, and palladium was unchanged at USD 2,231.82.

(Reporting by Brijesh Patel in Bengaluru; Editing by Rashmi Aich)