Gold slips as dollar firms ahead of U.S. inflation data

(Representative Image)

Gold prices dipped on Friday as the dollar firmed ahead of key U.S. inflation data that could drive the Federal Reserve's upcoming policy decisions.

Spot gold fell 0.4% to $1,840.44 per ounce, as of 1131 GMT, and was down about 0.5% for the week. U.S. gold futures declined 0.6% to $1,842.30.

"The U.S. dollar is trading marginally higher, thus weighing on gold prices, but price action will likely remain muted as we head into U.S. CPI later today," said DailyFX analyst Warren Venketas.

A stronger dollar makes bullion expensive for overseas buyers.

"Gold has been consolidating around the key $1,850 zone for some time now, but U.S. inflation data could prompt a breakout," Venketas added.

A higher-than-expected inflation print could bolster the Fed's aggressive stance as the U.S. central bank is expected to increase rates by 50 basis points next week and in July. The consensus forecast sees the year-over-year inflation rate for May steady at a blistering 8.3%.

Major central banks are picking up the pace of interest rate hikes to get on top of surging inflation. A high interest rate environment tends to increase the opportunity cost of holding non-yielding bullion.

"Hawkish central banks, rising real rates and a stronger U.S. dollar have taken the shine off the gold market. Withdrawal of unprecedented fiscal and monetary support is also weighing on sentiment," ANZ Research said in a note.

The current price range of $1,800–$1,900 per ounce will not provide any clear direction until gold breaks either side of the range, ANZ noted.

Meanwhile, gold discounts in India this week were stretched to their highest in seven weeks, while fresh concerns over the spread of COVID-19 in top consumer China left buyers reluctant to make purchases. [GOL/AS]

Elsewhere, silver slipped 0.7% to $21.50 and platinum was down 0.1% at $969.81, while palladium fell 0.2% to $1,921.73. All of them were on course for weekly declines, with platinum set for its worst week since April 22.