Gold firms as dollar rally pauses; focus on US inflation reading

Gold firms as dollar rally pauses; focus on US inflation reading

Gold rose on Tuesday as the dollar in which it is priced steadied, prompting some investors to buy the metal ahead of U.S. inflation data that could impact the Federal Reserve's monetary policy. Spot gold was up 0.3% at $1,859.05 per ounce by 0958 GMT, recovering slightly after falling as much as 1.7% on Monday on the dollar's rally. U.S. gold futures rose 0.1% to $1,861.10 per ounce.

The dollar was steady after touching a 20-year high on Monday, while benchmark 10-year U.S. Treasury yields were off 3-1/2-year peaks. "Gold remains a hedge against a (potential) policy mistake and that still continues to attract some buyers at these lower levels," Saxo Bank analyst Ole Hansen said. "From a technical perspective the key $1,850 level has now held on several occasions, so that's just attracting some short-covering," Hansen added.

Fears of a possible global economic slowdown amid aggressive policy tightening by major central banks and soaring inflation have soured sentiment in global share markets. Although gold is considered a hedge against inflation and a safe haven during global political and economic uncertainties, it's highly sensitive to rising U.S. interest rates, which raise the opportunity cost of holding non-yielding bullion.

Higher yields also tend to