Gold gained 0.6% on a softer dollar as traders await US CPI and PPI data. A 60% chance of a Fed rate hike next week caps upside, but geopolitical risk offers support.
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Gold rose 0.6% on Tuesday as the dollar slipped, with traders focused on US inflation data later this week that could shape the Federal Reserve's next policy move. Spot gold traded at $4,429.89 an ounce by 0208 GMT. US gold futures for December delivery were little changed at $4,475.10. The dollar index fell 0.4%, making dollar-priced metals cheaper for holders of other currencies.
"Gold remains locked in a battle between buyers and sellers, with neither party showing enough conviction to drive a sustained and persistent directional move," said Chris Weston, head of research at Pepperstone Group.
The US producer price index is due Thursday, followed by the consumer price index on Friday. Gold fell in the previous two sessions after data showed US job growth accelerated sharply in August, while the unemployment rate held at 4.1%, signaling an improving labor market.
According to the CME FedWatch Tool, traders see a 60% chance of a rate hike at the Fed's meeting next week. Elevated rates reduce the appeal of non-yielding gold.
"We don't see gold falling back too much if and when the central bank does raise rates. More important than the rate move is the notion that markets are somewhat uneasy about what the Fed and the Treasury are signalling," Marex analyst Edward Meir said in a monthly note. The analyst said the market's unease about the Fed's and Treasury's signals is more important than the rate move itself, and that gold is unlikely to fall sharply even if the central bank raises rates.
On the geopolitical front, Iran threatened the United States with "economic warfare" and said it had fired an advanced missile at US warships, pointing to the risks of further escalation in the war only days after both sides traded blows again.
Among other metals, spot silver gained 1% to $66.78 per ounce. Platinum rose 0.4% to $1,834.00. Palladium firmed 1% to $1,402.87.
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