Gold Edges Up as Dollar Softens; US Inflation Data in Focus

Gold prices inched upward on Tuesday, buoyed by a softer US dollar, as investors turned their attention to crucial inflation data scheduled for release later this week. The data is expected to provide fresh signals on the trajectory of the Federal Reserve's monetary policy.

Spot gold was trading 0.3% higher at $4,418.79 per ounce during early Asian hours. In contrast, US gold futures for December delivery dipped 0.3% to $4,464.80. A 0.3% decline in the US dollar index made greenback-priced bullion more attractive for holders of other currencies.

The market's focus now shifts to the US producer price index, due on Thursday, followed by the consumer price index on Friday. These reports could significantly shape expectations for the Fed's next move. According to the CME FedWatch Tool, traders currently assign a 60% probability to a rate hike at the central bank's policy meeting next week.

Gold's recent momentum was checked last week after data revealed a sharp acceleration in US job growth for August, while the unemployment rate held steady at 4.1%. While gold is traditionally viewed as a hedge against inflation, higher interest rates tend to diminish the appeal of the non-yielding asset.

Adding to the global monetary policy landscape, Deutsche Bank now anticipates that the European Central Bank will implement a 25-basis-point rate hike in December, in addition to a hike expected in September, citing persistent energy-related risks to the inflation outlook.

On the geopolitical front, Iran has threatened retaliation against any new US attacks on its assets, warning that energy infrastructure across the Gulf, including US oil and gas interests, remains vulnerable. This adds an element of uncertainty to the broader market environment.

Among other precious metals, spot silver gained 0.3% to $66.34 per ounce, platinum rose 0.6% to $1,836.97, and palladium climbed 0.9% to $1,401.47.