Gold remains stable as traders await US inflation data for cues from the Fed

By Brijesh Patel

(Reuters) – Gold prices were little changed on Tuesday as the dollar held steady and U.S. Treasury yields rose slightly. At the same time, investors awaited U.S. inflation data for June due later this week, which should provide more clarity on interest rate developments in the United States.

Spot gold was unchanged at $2,359.83 an ounce at 12:17 p.m. ET (4:17 p.m. GMT), after falling more than 1% in the previous session. U.S. gold futures rose 0.2% to $2,367.

The dollar rose 0.1 percent against its rivals, making gold more expensive for holders of other currencies, while 10-year Treasury yields rose slightly. [USD/ [US/]

It is expected that the US Federal Reserve will begin cutting interest rates as early as September, which will have a positive impact on current market conditions, said Bart Melek, head of commodity strategies at TD Securities.

Recent US economic data pointed to a weakening labor market and reinforced expectations that the US Federal Reserve will soon begin cutting interest rates.

However, Fed Chairman Jerome Powell said in testimony before Congress on Tuesday that while inflation is still above the Fed's two percent target, it has improved in recent months and further good data would strengthen the case for the central bank to cut interest rates.

The focus now turns to Thursday's consumer price index (CPI) data; the latest figures show a cooling from the unexpectedly high levels at the beginning of the year.

If markets show signs of persistent inflation in the US, this could cause the precious metal to give up further of its recent gains, says Han Tan, chief market analyst at Exinity Group.

According to the CME Group's FedWatch tool, traders currently believe there is a roughly 75 percent chance that interest rates will be cut in September. The attractiveness of non-interest-bearing precious metals tends to increase when interest rates are lower.

The spot price of silver fell 0.1% to $30.75 an ounce, platinum fell 1% to $986.20 and palladium fell 2.5% to $984.

(Reporting by Brijesh Patel and Daksh Grover in Bengaluru; Editing by Keith Weir and Emelia Sithole-Matarise)