Gold Subdued With Spotlight on U.S. Inflation Data

GOLD - JAKARTA. Gold prices were flat on Monday, with investor focus being on a key U.S. inflation reading as it could influence the size of the Federal Reserve's next interest rate hike.

Spot gold held its ground at $1,714.41 per ounce, as of 0524 GMT. U.S. gold futures were down 0.2% at $1,725.00.

"There remains some lingering general de-leveraging downward pressure on gold, but this week's inflation number may provide some relief," said Clifford Bennett, chief economist at ACY Securities.

"A further indication that inflation may have peaked would be encouraging for the gold market. The Fed will continue to hike regardless, but that there may be some end in sight could be enough to tilt gold back up following recent sharp declines."

The U.S. Consumer Price Index data, due on Tuesday, is expected to show that August prices rose at an 8.1% pace over the year, compared with an 8.5% print for July. Fed officials on Friday ended their public comment period ahead of the central bank's Sept. 20-21 policy meeting, with strong calls for another oversized rate increase to battle sky-high inflation.

The markets are largely expecting the Fed to raise rates by 75 basis points this month. Higher interest rates increase the opportunity cost of holding the non-yielding bullion and boosts the dollar, in which gold is priced.

The dollar index hovered close to its lowest level since Aug. 30 marked on Friday. Meanwhile, European Central Bank policymakers see a heightened risk that they will have to hike their key interest rate to 2%, sources told Reuters.

Spot gold is biased to break a resistance at $1,720 and rise towards $1,729, according to Reuters technical analyst Wang Tao. Spot silver rose 0.7% to $18.91 per ounce, after touching its highest in more than two weeks earlier in the session. Platinum dropped 0.6% to $875.49 and palladium fell 0.5% to $2,161.17.

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