Gold price falls due to strong US dollar, inflation data takes center stage; silver price loses 2.3%

Gold prices fell about 1% on Wednesday, pressured by a stronger U.S. dollar, as investors closely watched key inflation data from the world's largest economy for clues about a possible Federal Reserve rate cut in September.

By 9:44 a.m. ET (1:44 p.m. GMT), spot gold was down 0.9% at $2,502.38 an ounce, after falling as much as 1.1% earlier in the session. U.S. gold futures also fell 0.6%, reaching $2,537.60.

“Gold is trading weakly, down 0.35%, with prices at $2,506 on the Comex and ₹71,850 in MCX. The rise in the dollar index from yesterday's low of 100.40 to 100.85 has led to profit-taking in commodities, including gold. This strengthening of the dollar is contributing to the current pressure on gold prices. As market participants await the Core PCE Price Index on Friday in the US, further profit-taking could push gold prices towards USD 2,480 in Comex and ₹71,000 in MCX,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.

What is weighing on the price of gold?

The dollar rose 0.5%, making gold more expensive for holders of other currencies.

Investors are now focusing on chip giant Nvidia's quarterly results, expected later today, and U.S. personal consumption expenditures (PCE) data due on Friday.

If Friday's PCE numbers come in lower than expected, it could fuel expectations of a more dovish stance from the US Federal Reserve, potentially benefiting the price of gold, notes Ricardo Evangelista, senior analyst at ActivTrades.

According to the CME FedWatch tool, markets currently see a 66.5 percent probability of a 25 basis point rate cut by the US Federal Reserve in September and a 34.5 percent probability of a 50 basis point cut. Last week, gold ETFs recorded modest net inflows of 8 tonnes ($403 million), driven mainly by North American funds, the World Gold Council reported.

In other news, China's net gold imports through Hong Kong rose 17 percent in July, the first increase since March, according to data released Tuesday.

Since China is a major consumer of gold, this increase in demand could help support the global gold price.

Among other precious metals, spot silver fell 2.3% to $29.29 an ounce, platinum fell 1.5% to $938.95 and palladium fell 1.6% to $954.75.