All eyes on US inflation

Gold fell as investors sought clues about the direction of inflation data due on Thursday. Gold fell after posting its biggest gain in a month as investors sought clues about the direction of the precious metal from inflation data due this week. On the third trading day of the week, gold fell below $1,708 an ounce on the spot market. Spot gold, which has been trading below $1,700 since early October, had breached that mark on Tuesday amid a weakening dollar and falling bond yields. The Fed’s aggressive tightening to curb inflation is putting pressure on gold as more investors seek refuge in the dollar. The precious metal has lost 17% since reaching its highest level of the year in March. U.S. inflation data due on Thursday is expected to further dampen faint hopes that interest rates will slow and weigh on spot gold. Jun Rong Yeap, IG Asi Market Strategist, said: “While technical analysis suggests stronger confidence in the precious metal, this will need to be confirmed by the upcoming U.S. inflation data. “Buyers will look for a lower-than-expected inflation rate to justify the recent rally, and a higher-than-expected data could cut gold’s rally short,” he said. Investors will also be monitoring the results of the US midterm elections. A change in the balance of power in the Senate and House of Representatives could derail US President Joe Biden’s legislative agenda, potentially putting negative pressure on the precious metal by affecting the dollar and bond yields.