Gold prices dip on firm dollar, treasury yields; US inflation data in focus

Gold prices slipped on Wednesday as the dollar and U.S. Treasury yields rallied in the run-up to the last inflation reading before this month's policy meeting of the Federal Reserve.

Spot gold fell 0.1% to $1,850.10 per ounce by 1012 GMT, while U.S. gold futures were flat at $1,851.90.

"The sentiment is quite confused and that is leading to this sideways trading in the markets," said Saxo Bank analyst Ole Hansen, adding gold needs to break above the $1,870 price level to get some fresh momentum.

"Both the yield and dollar developments are not favourable (for gold) ... but against that we have got the World Bank downgrade of global growth ringing in the ears."

The World Bank on Tuesday slashed its 2022 global growth forecast by nearly a third and warned of rising risk of stagflation, providing some support to safe-haven gold.

The focus was on U.S. consumer price data due on Friday which could provide clues on whether the Fed will continue with its aggressive policy stance in the second half of the year.

The U.S. central bank is widely expected to raise interest rates at its meeting this month, a prospect that helped the dollar index rise 0.2% and kept the 10-year U.S. Treasury yield at the key 3% level. [USD/] [US/]

While gold is viewed as a hedge against inflation and a safe asset during political and economic uncertainties, higher interest rates increase the opportunity cost of holding the non-yielding asset.

Consumers and businesses are being squeezed by higher inflation and rising interest rates, casting uncertainty over the economic outlook, said Clifford Bennett, chief economist at ACY Securities.

"It may prove very rewarding over the next 1-2 years to be invested in gold," he added.

Elsewhere, silver fell 0.8% to $22.02 per ounce, platinum dipped 0.7% to $1,003.36 and palladium was 0.8% lower at $1,967.44.