Gold gains as dollar slips with eyes on US inflation data

(Reuters) – Gold rose on Monday, heading for its best session in nearly two weeks as the dollar retreated before this week’s key U.S. inflation reading that could influence the Federal Reserve’s interest rate decision later this month.

FILE PHOTO: A machine engraves information on an ingot of 99.99 percent pure gold during production at Krastsvetmet precious metals plant in the Siberian city of Krasnoyarsk, Russia, January 31, 2023. REUTERS/Alexander Manzyuk/File Photo

Spot gold climbed 0.4% to $1,924.60 per ounce by 1002 GMT, while U.S. gold futures rose 0.3% to $1,949.20.

A weaker dollar contributed to the gains, said Bank of China International analyst Xiao Fu, adding “the worries about a German recession and European slowdown certainly will have some safe-haven supportive factor as well.”

The euro zone economy this year will grow slower than previously expected, the European Commission forecast as the biggest economy, Germany, slips into recession.

The dollar index fell 0.4% ahead of U.S. inflation data due on Wednesday, making greenback-priced gold cheaper for overseas buyers.

That data could make traders revise their bets on whether the Fed has further to go in raising rates, with the CME FedWatch tool currently showing a 42% chance of a hike before 2024.

“The medium-term prospects for gold if the U.S. economy does manage to avoid a recession look more challenging,” Kinesis Money market analyst Rupert Rowling said in a note.

Ahead of Fed’s Sept. 19-20 meeting this month, Fed policymakers have been clear that they are not itching to raise rates, but few among them are ready to declare victory either.

Silver jumped 1% to $23.14 per ounce, its first rise since Aug. 29.

“China’s demand (for silver) seems to be picking up and with the country accounting for about half of global offtake, any improvement here could lend an element of support,” Edward Meir, an analyst who provides research for brokerage firm Marex, wrote in a monthly note.

Platinum added 0.9% to $900.43 after logging its biggest weekly decline since November 2021 last week, and palladium gained 0.7% to $1,206.16.

Reporting by Swati Verma in Bengaluru; Editing by Subhranshu Sahu, Janane Venkatraman and Shinjini Ganguli