Gold near one-month peak with focus on U.S. inflation data

(Reuters) – Gold steadied near a one-month peak on Wednesday, although prices were stuck in a tight range with gains curbed by an uptick in the dollar and investor caution ahead of the release of U.S. inflation data.

Spot gold was flat at $1,712.09 per ounce at 10:33 a.m. EST (1533 GMT). U.S. gold futures rose 0.2% to $1,718.80 per ounce.

Bullion prices were up more than 2% to breach the key $1,700 level on Tuesday.

Gold is holding near the top end of the range despite gains in the dollar index, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. “I’d be a little bit defensive on gold coming into tomorrow’s CPI data.”

The U.S. consumer price index (CPI) report for October is due to be released at 8:30 a.m. EST on Thursday. The data will provide the latest read on inflation in the United States in the wake of the Federal Reserve’s aggressive interest rate hikes.

Economists are expecting a deceleration in both the monthly and yearly core inflation to 0.5% and 6.5%, respectively.

U.S. money markets are pricing in a 50-basis-point Fed rate hike at the U.S. central bank’s policy meeting in December and a roughly 33% chance of a bigger 75-basis-point increase.

Gold is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which the precious metal is priced

The dollar index rose 0.3% after dropping to near a two-week low on Tuesday. [USD/][US/]

“With underlying physical demand (for gold) … the market still needs demand from investors in exchange-traded funds and speculators in futures to pick up,” Saxo Bank analyst Ole Hansen said in a note.

“For that to happen, the dollar and yields still need to send a clear signal they are rolling over.”

Spot silver fell 0.3% to $21.27 per ounce, after hitting more than a four-month peak in the previous session.

Platinum fell 1% to $987.55 per ounce while palladium dropped 1.4% to $1,894.25.