Gold rises on softer dollar, yields ahead of US inflation data

July 12 (Reuters) – Gold prices rose on Wednesday after the dollar and bond yields retreated as investors awaited US inflation data that could offer more cues on the Federal Reserve’s rate-hike policy path.

Spot gold was up 0.2% to USD 1,935.19 per ounce by 0728 GMT, having risen to a three-week high earlier in the session.

US gold futures also rose 0.2% to USD 1,940.50.

Making gold cheaper for holders of other currencies, the dollar index fell 0.3% to its lowest level since May 11. Benchmark 10-year US Treasury yields also slipped to their lowest in nearly a week.

“There has been some renewed confidence in gold prices lately, given the broad expectations for the upcoming US CPI to reflect further moderation in pricing pressures,” said Yeap Jun Rong, market strategist at IG.

Economists polled by Reuters expect June core inflation rate to have dropped to 5% from 5.3%, still significantly above the Fed’s 2% target. The data is due at 1230 GMT.

Some Fed members on Monday said the central bank was close to ending its monetary policy tightening, yet there was work to be done to bring down inflation.

Markets see a 92% chance of the Fed raising rates by 25 basis points at their policy meeting on July 25-26, as per the CME’s Fedwatch tool.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

While July’s rate hike was largely priced in, “if we see core inflation still being higher than expected, then I think the expectations of another rate hike coming September will start gaining traction,” Harshal Barot, senior consultant at Metals Focus, said.

In the wider base metals market, prices rose, supported by a weaker dollar, although a gloomy demand outlook loomed over the market.

According to the median forecast of 30 economists in a Reuters poll, China’s
export slump is expected to have accelerated in June.

Spot silver rose 0.1% to USD 23.14 per ounce, platinum rose 0.4% to USD 928.05, while palladium fell 0.1% to USD 1,250.29.

(Reporting by Seher Dareen in Bengaluru; Editing by Sherry Jacob-Phillips and Sohini Goswami)