Gold firms on softer dollar; US inflation data in focus

Gold climbed on Wednesday, supported by a softer U.S. dollar, while investors weighed price pressures from renewed attacks in the Middle East and awaited key inflation data for clues on the Federal Reserve's policy outlook. Spot gold rose 1.1% to $4,401.09 per ounce by 0825 GMT, while U.S. gold futures for December delivery gained 0.1% to $4,445.10. The U.S. dollar softened, making greenback-priced bullion more affordable for buyers overseas. "Gold is drawing ample support from a weaker dollar and technical buying, bouncing from its 100-day moving average," said Lukman Otunuga, senior research analyst at FXTM. "Ordinarily, an oil-driven inflation scare would weigh on gold by reinforcing the case for higher rates. However, broader dollar softness is outweighing that pressure today, with its near-term direction ultimately be decided by this week's U.S. inflation data." Investors are bracing themselves for the producer price index (PPI) data, due on Thursday and the consumer price index data on Friday. Traders are now pricing about a 60% chance of an interest rate hike at the central bank's policy meeting next week, according to the CME FedWatch Tool. Meanwhile, Iran's Revolutionary Guard said it fired ballistic missiles at a base in Jordan used by the U.S. military and attacked 10 ships on Wednesday, after Washington said it had destroyed five Iranian oil tankers. Brent crude prices rose past $100 a barrel on Wednesday, for the first time since July 24. Although gold is typically seen as an inflation hedge, higher rates tend to diminish non-yielding bullion's appeal. "Bears may focus on an emerging head-and-shoulders formation, with a break below $4,300 potentially signalling a deeper correction towards the established support area around $4,000," said Ole Hansen, head of commodity strategy at Saxo Bank in a note. "Conversely, a sustained break back above the 200-day moving average would improve the technical outlook and bring $4,770 into focus." Among other metals, spot silver gained 1.3% to $66.59 per ounce, platinum climbed 2.2% to $1,852.86, and palladium rose 0.5% to $1,355.62.