Gold struggles for momentum as traders await US inflation data

Gold prices were steady on a weaker dollar on Tuesday, although bullion struggled for momentum as investors were wary of placing big bets ahead of U.S. inflation data that could influence the Federal Reserve's policy trajectory.

Spot gold held its ground at $1,926.19 per ounce by 0231 GMT. U.S. gold futures were flat at $1,930.20.

Bullion is being supported by a weaker dollar and yields as the Fed seems to imply that they're at the end of the tightening cycle, "but gold bugs appear hesitant to overcommit ahead of Wednesday's U.S. inflation report," said Matt Simpson, senior market analyst at City Index.

The dollar (.DXY) was near a two-month low on prospects of lower rates, while benchmark U.S. yields hovered near Monday's lows at 4.0018 per cent. A weaker dollar makes gold cheaper for holders of foreign currencies.

Several U.S. central bank officials on Monday said the Fed will likely need to raise interest rates further to bring down inflation that is still too high, but the end to its current monetary policy tightening cycle is getting close.

Investors see a 95 per cent chance that the central bank would raise rates in its July meeting into the 5.25-5.5 per cent range, keeping them there until rate cuts could be seen in 2024, as per CME's Fedwatch tool.

Higher rates dampen the appeal of bullion, which pays no interest.

The focus this week will be on the U.S. CPI (Consumer Price Index) data due on Wednesday, with core CPI in June expected to have risen 0.3 per cent month-on-month, as per a Reuters poll.

"As we've become accustomed to inflation decelerating, an upside surprise would spark the most volatile reaction and weigh on gold. Gold bulls need inflation to behave to justify a bullish breakout," Simpson added.

Asian shares bounced as investors hoped for an end to rate hikes and cheered the prospect China will deliver economic stimulus to prop up stalling growth.

In other precious metals, spot silver rose 0.2 to $23.16 per ounce, platinum and palladium climbed 0.3 per cent each to $929.56 and $1,243.81, respectively.