Gold stays soft ahead of US inflation data

LONDON - Gold prices declined on Tuesday with a drop in crude oil, and traders said the metal was likely to trade in a range ahead of US inflation data that could give direction to the dollar.

By (Reuters)

Published: Tue 15 Aug 2006, 7:45 PM

Last updated: Sat 4 Apr 2015, 2:13 PM

Spot gold XAU fell to $624.50/625.30 an ounce by 0952 GMT from $628.80/629.60 in New York late on Monday, when it had dropped to its lowest level since July 27 at $623.50 an ounce.

“There is a tendency for the market here to drift lower, looking to test support around $620 level,” said David Holmes, director, precious metals sales at Dresdner Kleinwort Investment Bank.

“We think that any bigger moves will be driven by an external event, perhaps by some surprising strength in the dollar or a weakness in the oil price,” he said.

Dealers were waiting for US inflation data that should provide more clues about whether the Federal Reserve will resume lifting interest rates, after it held rates steady at a meeting last week following 17 consecutive rises.

If US core producer prices for July, due at 1230 GMT, along with other data this week point to an acceleration in inflation, the Fed might be tempted to raise rates next month, they said.

Rising interest rates tend to boost the dollar and put pressure on gold. The dollar hugged tight ranges ahead of the data on Tuesday.

Gold came under pressure because of oil, which slipped towards $73 a barrel as a fragile truce held between Israel and Lebanon, while oil kept flowing from North America’s largest field after expectations of a full shutdown for repairs.

Thousands of refugees headed home to south Lebanon and Israeli forces began pulling back from some positions they had occupied.

“With the ceasefire imposed by the UN in effect in Lebanon, some discounting of the war premiums on gold should be expected and it would not be surprising for gold to extend the weakness in the short term,” Standard Bank said in a report.

Summer holidays slowed physical trade in Japan and its volatile price scared off jewellers in India, the world’s largest gold consumer, and other parts of Asia.

Silver XAG was also weak, but attracted buying interest from jewellers and the industrial sector after it fell on Monday to its lowest level since August 2 at $11.70 an ounce.

Spot silver XAG was quoted at $11.91/12.01 an ounce, down from $12.10/12.20 late in New York.

Platinum XPT edged up $1 to $1,222/1,227, while palladium XPD rose to $315/319 an ounce from $313/318 in the US market.