Gold holds losses as inflation data reinforces rate hike bets

April 28 (Reuters) – Gold eased on Friday after a rise in U.S. inflation in March buoyed the dollar and reinforced bets for an interest rate hike next week, but banking sector concerns kept bullion on course for a small monthly gain.

Spot gold was 0.3% lower at $1,982.65 per ounce by 9:50 a.m. EDT (1350 GMT), but was up 0.8% for the month. U.S. gold futures eased 0.4% to $1,991.30.

The U.S. core personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, rose 0.3% in March, the same as in February and in line with expectations, with traders adding to bets for a rate hike next week.

Elevated rates dull zero-yielding bullion’s appeal.

Gold seemed to largely ignore the last key piece of data ahead of next week’s meeting, but “a 25 bps hike next week is now certain though it remains in question whether the Fed will signal a pause”, said Tai Wong, an independent metals trader based in New York.

“Gold seems likely to remain in its tight recent range for now, though a weekly close under $1,965 could trigger further losses, while bulls would welcome a push back above $2,000.”

The dollar held gains after the inflation data, but is headed for a monthly decline. A weaker dollar makes bullion cheaper for overseas buyers.

Bullion has consolidated this month due to “growth concerns sending U.S. rate cut expectations higher, softer bond yields and a continued lingering banking sector concern”, said Ole Hansen, head of commodity strategy at Saxo Bank.

Gold had scaled a one-year peak of $2,048.71 in mid-April as the banking crisis unfolded.

Also on the radar were developments surrounding the U.S. debt ceiling.

Silver fell 0.6% to $24.80 per ounce, platinum shed 0.9% to $1,067.85, while palladium gained 1.1% to $1,511.32 — all headed for second monthly rises.

Reporting by Arundhati Sarkar in Bengaluru; editing by Uttaresh Venkateshwaran

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