Gold firms as dollar eases ahead of US inflation data

Gold prices rose on Thursday, supported by a softer dollar, while market participants awaited US inflation data that could influence the Federal Reserve's policy path.

Spot gold was up 0.4 per cent at $1,883.00 per ounce, as of 0650 GMT. US gold futures also rose 0.4 per cent to $1,886.30.

The dollar index wobbled near a seven-month low, while benchmark US 10-year Treasury yields also fell. A weaker dollar makes greenback-priced bullion more appealing to other currency holders.

"Gold prices are very well-supported as the dollar has weakened. However, on a technical front, bullion is seeing some resistance around $1,880 levels, and thus, it has been consolidating in a range since few days," said Ajay Kedia, director at Kedia Commodities, Mumbai.

Investors' focus remains on the US consumer price index data due at 1330 GMT. Economists polled by Reuters project consumer prices grew 6.5 per cent year-on-year in December, moderating from a 7.1 per cent rise in November.

"If lower-than-expected CPI results are announced, we may see gold price above $1,900. However, any upward move is likely to be very short-term as investors will lock in profits," said Michael Langford, director at corporate advisory firm AirGuide.

Boston Federal Reserve bank leader Susan Collins said she is inclined to raise interest rates by a quarter percentage point at the central bank's upcoming policy meeting, the New York Times reported.

The Fed had raised rates by 75 basis points (bps) four times last year, before slowing to a 50 bps increase in December.

Although gold is seen as an inflation hedge, rising rates increase the opportunity cost of holding bullion.

On the physical front, Indian gold refiners have nearly stopped imports of gold dore, a semi-pure alloy, as grey market operators offer hefty discounts, industry officials said.

Silver gained 0.8% to $23.61, platinum fell 0.2 per cent to $1,068.81 and palladium inched 0.7 per cent higher to $1,786.85.