Gold subdued on hawkish policy remarks by Fed after US inflation data

By Arundhati Sarkar

(Reuters) - Gold prices edged lower on Thursday from last session's one-month peak, weighed down by hawkish policy remarks by U.S. Federal Reserve officials even as data pointed to signs of inflation peaking.

Spot gold fell 0.3% to $1,786.71 per ounce by 0852 GMT, after hitting its highest since July 5 at $1,807.79 on Wednesday.

U.S. gold futures slipped 0.6% to $1,802.30.

"Gold has struggled to make significant headway despite the correction in both the U.S. dollar index and the easing in the 10-year U.S. treasury bond yield," said independent analyst Ross Norman.

"Weighing on investors minds is the notion that maybe we have seen peak inflation following the softer-than-expected CPI, coupled with hawkish remarks by two FOMC members, with gold slipping back to technical support on the charts."

The dollar index weakened, making bullion appealing for overseas investors. [USD/] [US/]

The July CPI report came in softer than expected, causing markets to reposition on hopes that inflation was peaking.

However, Fed policymakers noted that they would continue to tighten monetary policy until price pressures were fully broken.

Fed Chair Jerome Powell's argument that the United States is not in a recession has been validated thus far by the non-farm employment number that point to a continued tight labour market, and market therefore is looking at a 75-basis-point interest rate hike in September, StoneX analyst Rhona O'Connell said.

While gold is considered an inflationary hedge, rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion.

But, there's a lot of data to come ahead of the next FOMC meet, and gold continues to consolidate in its new range, O'Connell added.

Focus now turns to U.S. producer prices data, along with jobless claims numbers later in the day.

Elsewhere, spot silver fell 0.8% to $20.41 per ounce, while platinum rose 1.4% to $955.17.

Palladium gained 0.7% to $2,254.38.

 

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber)