Gold declines on strong US dollar, focus shifts to inflation data; silver down 2.3%

Gold prices fell by approximately 1% on Wednesday, pressured by a stronger U.S. dollar as investors closely monitored key inflation data from the world's largest economy for indications of the Federal Reserve's potential interest rate cut in September.

By 9:44 a.m. ET (1344 GMT), spot gold had declined 0.9% to $2,502.38 per ounce, after dropping as much as 1.1% earlier in the session. U.S. gold futures also fell 0.6%, reaching $2,537.60.

“Gold trades weak, down by 0.35%, with prices at $2,506 in Comex and ₹71,850 in MCX. The rise in the dollar index, from yesterday’s low of 100.40 to 100.85, has prompted profit booking in commodities, including gold. This strengthening of the dollar is contributing to the current pressure on gold prices. As market participants await Friday's Core PCE Price Index in the US, further profit booking could push gold prices towards $2,480 in Comex and ₹71,000 in MCX,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

What's weighing on gold prices?

The dollar rose by 0.5%, making gold more expensive for holders of other currencies.

Investors are now focusing on chip giant Nvidia's quarterly earnings, expected later today, and U.S. personal consumption expenditure (PCE) data due on Friday.

If Friday's PCE figures come in lower than anticipated, it could raise expectations of a more dovish stance from the Federal Reserve, potentially benefiting gold, noted Ricardo Evangelista, senior analyst at ActivTrades.

Markets currently see a 66.5% chance of a 25-basis point rate cut by the U.S. Federal Reserve in September and a 34.5% chance of a 50-basis point cut, according to the CME FedWatch tool. Last week, gold ETFs saw modest net inflows of 8 metric tons ($403 million), primarily driven by North American funds, as reported by the World Gold Council.

In other news, China’s net gold imports via Hong Kong increased by 17% in July, the first rise since March, according to data released on Tuesday.

As China is a major consumer of gold, this rise in demand could help support global gold prices.

Among other precious metals, spot silver fell by 2.3% to $29.29 an ounce, platinum declined by 1.5% to $938.95, and palladium decreased by 1.6% to $954.75.