(Reuters) – Gold edged higher as the dollar softened on Tuesday but lacked the momentum to break out of a recent tight range as traders positioned for U.S. inflation data and the Federal Reserve’s policy decision.
Spot gold rose 0.3% to $1,963.29 per by 1016 GMT. U.S. gold futures rose 0.4% to $1,976.80.
“Bigger moves are unlikely to take place before the release of the U.S. CPI data later today,” UBS analyst Giovanni Staunovo said, adding that the slightly weaker dollar was offering gold some support.
The dollar eased 0.4% to near its lowest in three weeks, making greenback-priced bullion more appealing to overseas buyers. [USD/]
U.S. May CPI is expected to rise 0.2% on a monthly basis, after a 0.4% rise the prior month, according to economists polled by Reuters.
Yet expectations of U.S. economic growth weakening could support gold prices, Staunovo added.
While gold is seen as a hedge against inflation, higher rates to tame price pressures generally weigh on the non-yielding asset’s appeal.
Traders and most big Wall Street banks see a 79% chance of the Fed standing pat on rates on June 14, according to the CME FedWatch tool.
However, traders see a 59% chance of a 25 bps rate hike in July.
Gold may also be finding support from expectations that central banks are near the peaks in their rate hike cycles, said analysts at Commerzbank in a note, seeing gold prices “slowly but surely regain ground over the next few months”.
In Britain, employment and wage growth soared in the three months to April while unemployment fell, adding to pressure on the Bank of England to raise rates later this month to tame inflation that stands at 8.7% – the highest reading, along with Italy, in the Group of Seven countries.
Gold priced in the euro and sterling fell around 0.2%.
Silver rose 0.4% to $24.14 per ounce, platinum fell 0.3% to $986.71 while palladium jumped 1.7% to $1,372.20.
Reporting by Seher Dareen in Bengaluru; Editing by Kirsten Donovan