Gold Holds Steady but Heads for Monthly Loss as Rate Bets Firm Up

Gold prices were little changed on Wednesday but stayed on course for a monthly loss, as expectations of higher interest rates continued to weigh on the market and investors looked ahead to US inflation data for signals on the Federal Reserve's policy path.

Spot gold was nearly flat at $4,178.59 an ounce as of 0037 GMT, down close to 6% over the month. US gold futures, however, rose 0.7% to $4,210.30.

The market is awaiting the US personal consumption expenditures (PCE) price index, due at 1230 GMT, followed by the nonfarm payrolls report on Friday. Both releases are being watched for clues on how the Fed might move on rates.

Federal Reserve Bank of New York President John Williams said the central bank has time to assess economic data before deciding when to raise interest rates again, adding that one more increase is likely before the year ends. Traders, according to CME's FedWatch Tool, see a 50% chance of a rate hike in October and a 92% chance of one in December.

In a high-interest-rate environment, investors often favour yield-bearing assets over gold, which pays no interest.

Sentiment was also shaped by a sharp drop in US consumer confidence, which fell to a near 12-1/2-year low in September. Households expected business and labour market conditions to worsen over the next six months, citing the Middle East conflict and rising rates.

On the geopolitical front, Qatar said it hopes shuttle diplomacy between Iran and the US can produce a breakthrough, despite US President Donald Trump denying media reports that he was willing to ease sanctions and release frozen funds in exchange for Iranian concessions on its nuclear programme.

Among other precious metals, spot silver slipped 0.2% to $61.33, while platinum rose 0.5% to $1,713.15 and palladium added 0.5% to $1,228.95. All three were also on track for monthly declines.