IGI Logo

 Gold prices held their ground near the lowest levels in more than nine months on Wednesday, as investors cautiously awaited U.S. inflation data for cues on the road ahead for the Federal Reserve's monetary policy stance.

Spot gold was steady at $1,725.83 per ounce at 0543 GMT, after dropping to its lowest since late-September at $1,722.30 earlier in the session. U.S. gold futures dipped 0.2% to $1,722.00.

"Traders are teetering on the edge of their seats ahead of U.S. CPI," and currency and gold investors are probably executing on a need-only basis, said Stephen Innes, managing partner at SPI Asset Management.

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

Barring a major surprise, the CPI data could coalesce investors' expectations for a 75-basis-point interest rate hike by the Fed later this month, as the U.S. central bank seeks to rein in inflation.

With the market convinced the Fed will go with the jumbo hike at its July meeting, it feels like long positions in gold are still swimming upstream, but data showing inflation has peaked could mitigate rate-hike pressure and gold should catch a small flyer, Innes said.

Although gold is seen as an inflation hedge, higher rates draw investors away from zero-yield bullion.

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

Benchmark U.S. 10-year Treasury yields rose, decreasing bullion's appeal. [US/]

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/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 eased 0.3% to $843.58, and palladium gained 0.2% to $2,031.18.