Gold gains as markets await key US inflation data

Gold edged higher on Tuesday after touching a more than two-month peak earlier, with market participants awaiting key U.S. inflation figures that could shape expectations for the Federal Reserve's policy path. Spot gold was up 0.1% to $4,393.69 per ounce at 09:37 a.m. EDT (1337 GMT), after hitting its highest level since June 5 earlier at $4,434.84. U.S. gold futures rose 0.8% to $4,453.40. "The market is looking ahead to this week's inflation data for some kind of confirmation that inflation is in check," said Peter Grant, vice president and senior metals strategist at Zaner Metals, adding that a moderation in the annualized CPI should continue to be supportive for gold. The U.S. consumer price report due on Wednesday and producer price data on Thursday are likely to shape monetary policy expectations after weak July U.S. jobs data on Friday led markets to scale back bets that the Fed would raise rates next month, prompting a 2.4% daily gain in gold. "Gold is still fairly well bid at this point in the wake of last week's jobs data disappointment, which eroded expectations for a rate hike in September," Grant said. Still, traders are pricing in about a 48% chance of a September hike, and a 78% chance in December, according to the CME FedWatch Tool. Cleveland Federal Reserve Bank President Beth Hammack said on Monday she believed the time was right to begin raising rates gradually to avoid the need for sharper increases later. A higher interest rate environment tends to reduce the appeal of non-yielding gold. On the geopolitical front, U.S. President Donald Trump responded with his own demands to Tehran's conditions for a peace deal, calling for Iran to pay compensation for those killed in wars, attacks and protests. However, oil prices pared gains as signs of progress in Oman-Iran talks over shipping through the Strait of Hormuz were weighed against ongoing disruption to Middle East energy flows. Among other metals, spot silver slipped 1.4% to $64.81 per ounce, platinum dropped 0.2% to $1,749.51, and palladium dipped 1.3% to $1,364.75.