Gold holds steady on lower yields, with focus on U.S. inflation data

Gold prices were flat on Tuesday as dollar and Treasury yields fell, while investors looked forward to U.S. inflation data later this week that could offer more clarity on the Federal Reserve’s rate hike path. FUNDAMENTALS * Spot gold were flat at $1,786.86 per ounce, as of 0112 GMT, after rising 0.8% in the previous session. * U.S. gold futures were steady at $1,804.70. * The dollar index moved further away from a one-week peak hit post Friday’s blockbuster U.S. jobs report, making gold less expensive for other currency holders. * Benchmark U.S. 10-year Treasury yields dipped to 2.7554%, reducing the opportunity cost of holding non-interest bearing gold. * Markets are looking ahead to U.S. inflation data for July, which will be released on Wednesday. Analysts polled by Reuters expect annual inflation to have eased to 8.7% in July from 9.1% in June. * Fed funds futures traders are now pricing for a 64.5% chance of another 75-basis-point rate increase at the U.S. central bank’s next policy meeting in September to combat soaring inflation. * Although gold is seen as a hedge against inflation, higher U.S. interest rates dull non-yielding bullion’s appeal. * U.S. consumers’ expectations for where inflation will be in a year and three years, respectively, dropped sharply in July, a New York Federal Reserve survey showed on Monday, indicating U.S. central bankers are winning the fight. * China announced new military drills around Taiwan on Monday, eliciting concern from U.S. President Joe Biden, a day after the scheduled end of Beijing’s largest exercises to protest last week’s visit to the island by U.S. House Speaker Nancy Pelosi. * Spot silver eased 0.1% to $20.63 per ounce, platinum fell 0.1% to $938.99, and palladium was unchanged at $2,231.82.