Gold price steadies near 9-month low with spotlight on US CPI data

By Eileen Soreng

(Reuters) - Gold prices steadied on Wednesday after plummeting to a more than nine-month low, with investors awaiting U.S. inflation data for cues on the Federal Reserve's policy tightening path.

Spot gold rose 0.1% to $1,728.09 per ounce by 0955 GMT, after dropping to its lowest since late-September at $1,721.98 earlier in the session. U.S. gold futures were also up 0.1% at $1,726.70.

"It's a dollar story right now and rising interest rates. Those two macro factors are weighing on the price of gold," said Fawad Razaqzada, market analyst at City Index.

"It looks like $1,700 is the next target ... If we get a strong CPI report today from the U.S., that could be the trigger to push gold down to that level."

The U.S. Labor Department's June Consumer Price Index (CPI) is expected to have accelerated by 1.1% and 8.8% on a monthly and annual basis, respectively.

A higher-than-expected inflation could underpin market expectations for a 75-basis-point interest rate hike by the Fed later this month, as the central bank seeks to tame soaring inflation.

Although gold is seen as an inflation hedge, higher rates draw investors away from bullion, as they tend to lift bond yields and thus raise the opportunity cost of holding zero-yield gold.

The dollar held near 20-year highs, continuing to make greenback-priced gold less attractive for buyers holding other currencies. [USD/]

Gold will rally from time to time as investors and traders try to pick the bottom, but the market will likely continue to stay flat or trend lower with a strengthening U.S. dollar, said Michael Langford, director at corporate advisory AirGuide.

Spot silver firmed 0.4% to $18.97 per ounce, platinum fell 0.2% to $844.01 and palladium shed 1.8% to $1,989.28.

 

(Reporting by Eileen Soreng and Bharat Govind Gautam in Bengaluru; Editing by Vinay Dwivedi)