Gold is trading in a tight range with US inflation data in the spotlight

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Gold bars are pictured after being inspected and polished at the ABC refinery in Sydney on August 5, 2020.

DAVID GRAY | AFP | Getty Images

Gold prices edged lower on Wednesday as the rising dollar and Treasury yields limited bullion’s appeal as investors awaited U.S. inflation data for more direction on interest rates. ‘interest.

Spot gold was down 0.2% at $1,848.75 an ounce, by 0302 GMT, while US gold futures were flat at $1,851.20.

“Gold has been treading water for the past few weeks. I think the reason for that is people are probably getting a little bullish on some inflation readings,” said Edward Meir, analyst at ED&F Man Capital Markets.

“We don’t really see gold moving and that’s because there’s a perception that we’re approaching peak inflation…Gold should see progressively higher inflation readings…But if inflation stabilizes, it’s not good for gold.”

Bullion is used as a hedge against inflation, but higher interest rates increase the opportunity cost of holding the non-performing asset.

Gold’s gains were largely capped as central banks around the world tightened monetary policy to rein in soaring prices. Investors are now awaiting core consumer price index (CPI) data due Friday for the implications for U.S. interest rates.

The CPI is expected to have gained 5.9% on the year, after an annual rise of 6.2% in April, according to the median estimate of economists polled by Reuters.

In other metals, platinum fell 0.1% to $1,009.85 an ounce and palladium rose 0.8% to $2,000.19. Silver fell 0.3% to $22.14.

“ETF outflows have accelerated for platinum and silver products. Slowing auto sales, concerns about slowing growth and recession risk are starting to weigh on the demand outlook for a large part of the resort,” Standard Chartered wrote in a note.

The World Bank on Tuesday lowered its global growth forecast for 2022 by almost a third to 2.9%.

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