Gold struggles for momentum as traders await US inflation data

July 11 (Reuters) – Gold gained on a weaker dollar on Tuesday but struggled for momentum, as investors were wary of placing big bets ahead of US inflation data that could influence the Federal Reserve’s policy trajectory.

Spot gold rose 0.3% to USD 1,931.62 per ounce by 0717 GMT. US gold futures were also up 0.3% to USD 1,937.10.

A weaker dollar is supporting bullion as the Fed seems to imply that it is at the end of its monetary tightening cycle, “but gold bugs appear hesitant to overcommit ahead of Wednesday’s US inflation report”, said Matt Simpson, senior market analyst, City Index.

The dollar index was near a two-month low. A weaker dollar makes gold cheaper for holders of other currencies.

Several Fed officials said the Fed would likely need to raise interest rates to bring down inflation, but it was close to the end of its tightening cycle.

Investors see a 92% chance that the Fed would raise rates in its July meeting into the 5.25%-5.5% range, and then holding them until 2024, as per CME’s Fedwatch tool.

Higher rates dampen non-yielding bullion’s appeal.

The focus this week will be on the US Consumer Price Index (CPI) data due on Wednesday, with core CPI inflation in June expected to have risen 0.3% month-on-month, according to a Reuters poll.

“Any disappointment (on CPI data) could lead to hawkish repricing and that would dim gold’s appeal,” said OCBC Executive Director and FX Strategist Christopher Wong.

European Central Bank (ECB) member Francois Villeroy de Galhau said the ECB was close to its rates’ peak and would need to keep them steady to bring inflation down to the ECB’s 2% target.

Spot silver rose 0.7% to USD 23.27 per ounce, platinum was up 0.4% to USD 930.48, while palladium gained 0.5% to USD 1,246.34.

(Reporting by Seher Dareen in Bengaluru; Editing by Sherry Jacob-Phillips and Rashmi Aich)