Gold price falls due to stronger dollar, market awaits US inflation data

By Daksh Grover

(Reuters) – Gold prices fell on Wednesday as the dollar rose, as investors awaited this week's key U.S. inflation report, which is expected to shed more light on the extent of a possible interest rate cut in September.

Spot gold fell 0.4% to $2,514.11 an ounce by 03:13 GMT. Gold prices hit a record high of $2,531.60 on August 20.

US gold futures fell 0.2% to $2,549.00.

The dollar index rose 0.1%, reducing the attractiveness of gold for foreign currency holders. [USD/]

“The market seems to be waiting for a catalyst to trigger the potential bullish break above the $2,532 level,” said Kelvin Wong, OANDA’s senior market analyst for Asia Pacific.

The short-term trend for gold remains strong and offers the potential to reach new highs. In the longer term, it could face resistance in the $2,585-$2,595 range, Wong added.

Market participants are eagerly awaiting the release of US personal consumption expenditures (PCE) data on Friday, the Federal Reserve's preferred inflation measure.

According to the CME FedWatch tool, traders have fully priced in a Fed easing next month. The probability of a 25 basis point cut is 67 percent, while the probability of a deeper 50 basis point cut is about 33 percent.

In a low interest rate environment, unprofitable gold bars tend to thrive.

Fed Chairman Jerome Powell last week advocated an early start to interest rate cuts and expressed confidence that inflation could reach the US central bank's two percent target.

A report on Tuesday showed that consumer confidence in the U.S. rose to a six-month high in August, but Americans are growing increasingly concerned about the state of the labor market.

Data on Tuesday showed China's net gold imports through Hong Kong rose about 17 percent in July from the previous month, the first increase since March.

Among other metals, spot silver fell 0.7% to $29.78 an ounce, platinum rose 0.3% to $956.00 and palladium fell 0.4% to $966.40.

(Reporting by Daksh Grover in Bengaluru; Editing by Subhranshu Sahu)