Gold eases on firm dollar; spotlight on US inflation data

Gold prices retreated on Tuesday as the US dollar maintained its strength, with traders closely watching upcoming US inflation data for clues about the Federal Reserve's interest rate path. Spot gold declined 0.2% to $4,164.45 per ounce by 0201 GMT after peaking at a one-week high on Monday. US gold futures for December delivery dropped 0.1% to $4,187.90.

The US dollar remained close to an 18-month peak reached the previous day, making dollar-based metals pricier for holders of other currencies. The Consumer Price Index (CPI) is released on Wednesday, followed by the Producer Price Index (PPI) report on Thursday. Analyst Kyle Rodda emphasized that US CPI data would be crucial for gold's near-term performance; a hotter-than-expected inflation reading, especially on the core measure, could trigger another decline in gold if it spurs expectations of an October rate hike.

Currently, there is only a 21% probability of a Federal Reserve rate increase this month, but traders are pricing in an 88% chance of a December hike, according to CME's FedWatch tool. Federal Reserve President Beth Hammack indicated that the central bank should swiftly adopt a more restrictive monetary policy to curb inflation, which she believes has become more widespread and is beginning to influence firms' pricing strategies.

Geopolitically, Saudi Arabia reported a fresh wave of attacks, with Riyadh airport remaining closed following a deadly Houthi missile strike on Saturday. Silver eased 0.5% to $60.01, platinum fell 0.2% to $1,682.47, and palladium declined 0.5% to $1,137.69.