Gold prices edged higher on Thursday as the market focused on key U.S. inflation data that could provide guidance on the Federal Reserve’s next interest rate decision.
Spot gold was up 0.3% at $2,303.80 an ounce by 0816 GMT, after falling to its lowest level since June 10 on Wednesday.
U.S. gold futures rose 0.1% to $2,314.40.
The dollar index weakened 0.1% after hitting a near two-month high in the previous session. The weakening dollar makes gold more attractive to holders of other currencies.
“Gold is supported by a subdued US dollar, with traders also aware that falls below $2,300 since April have proven to be short-lived,” said Han Tan, chief market analyst at Exinity Group.
“If prospects for the Federal Reserve to cut interest rates by the end of 2024 dwindle further, gold bulls may ultimately give up on keeping bullion above the psychological level of $2,300.”
According to the CME’s FedWatch tool, traders currently give a 62% chance of a rate cut in September.
Lower interest rates reduce the opportunity cost of holding bullion without yield.
Fed Governor Michelle Bowman on Wednesday reiterated her basic view that “inflation will continue to fall if the policy rate remains stable.”
Data due for the week includes first-quarter US gross domestic product estimates, due at 1230 GMT, and personal consumption expenditures (PCE) inflation data on Friday.
“Gold prices remain entangled in a tug of war between a less docile Fed and elevated levels of geopolitical tension,” BMI analysts said in a note dated Wednesday.
In the Middle East, cross-border tensions between Israel and Lebanon’s Hezbollah have escalated in recent weeks, fueling fears of an all-out war between Israel and Hezbollah that could involve other regional powers.
Spot platinum was down 0.6% at $1,004.60, palladium lost 0.7% to $922.25, while silver gained 0.1% to $28.79.
