Gold stuck in tight range as focus turns to US inflation print

Spot gold was up 0.1% at $1,808.20 per ounce by 2:24 pm

Gold prices were trapped in a tight range as investors awaited US inflation data on Tuesday that could provide more clarity on the Federal Reserve's timeline for policy tightening.

Spot gold was up 0.1 per cent at $1,808.20 per ounce by 0854 GMT (2:24 pm). US gold futures were 0.2 per cent higher at $1,808.70.

"If we get a slightly hotter inflation print today that could exert upward pressure on the US 10-year yields, which in turn could exert downward pressure on gold," said CMC Markets UK's chief market analyst Michael Hewson.

After the US consumer price index due for release at 1230 GMT (5:30 pm), the focus turns to Fed Chairman Jerome Powell's testimony before Congress on Wednesday and Thursday for his response to the inflation data and possible tapering measures.

Also Read | Oil rises on expectations of US crude stocks falling

Following a hawkish tilt from the US central bank last month, Powell said the Fed would not raise interest rates too quickly based only on the fear of coming inflation.

Though gold is considered a hedge against inflation, a Fed rate hike would dull its appeal as that increases the opportunity cost of holding the non-yielding metal.

The dollar index edged 0.1 per cent against rivals, making gold less appealing for other currency holders.

"The fact that the Fed and the ECB are likely to diverge when it comes to monetary policy over the course of the next 6 to 12 months, there is a potential for the dollar to go higher and that could constrain to a certain extent the upside in gold prices," Hewson added.

The European Central Bank has pledged to be "persistent" and will not repeat its past mistake of tightening policy too early, its president Christine Lagarde said on Tuesday.

Elsewhere, silver rose 0.2 per cent to $26.23 per ounce, palladium fell 0.8 per cent to $2,833.41 and platinum eased 0.1 per cent to $1,116.19.