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Gold prices decline as market awaits crucial US inflation figures

Gold prices saw a slight decrease on Tuesday as investors awaited significant U.S. inflation data, which might impact the Federal Reserve’s decision on interest rate cuts.

Spot gold dipped by 0.3% to $2,342.80 per ounce at 0732 GMT, after experiencing a 1% increase on Monday.

Conversely, U.S. gold futures climbed 0.4% to $2,343.80. The market is particularly attentive to a potential change in U.S. monetary policy, where the Fed may seek evidence to consider interest rate hikes instead of further easing, which could bolster the dollar significantly, posing a notable risk.

Kelvin Wong, senior market analyst for Asia Pacific at OANDA, highlighted the possibility of a further corrective move in spot gold.

Nonetheless, he pointed out that spot gold retains a positive bias in the short term, with $2,310 being a critical support level for the week. The core personal consumption expenditures (PCE) price index, which serves as the Fed’s preferred inflation gauge, is anticipated on Friday.

Recent minutes from Fed meetings indicated a halt in the benchmark policy rate, but discussions about potential future rate hikes were emphasized. Traders are currently factoring in a 63% probability of a rate cut by November, according to the CME FedWatch Tool.

While bullion is traditionally viewed as a hedge against inflation, higher interest rates elevate the opportunity cost of holding non-yielding gold.

Other precious metals also experienced declines, with spot silver decreasing by 0.8% to $31.42, platinum falling by 0.7% to $1,047.20, and palladium dropping by 0.7% to $982.24.

In parallel, Vietnam’s central bank announced plans on Monday to discontinue gold auctions in the domestic market and introduce new measures aimed at stabilizing prices.

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