Gold prices fall to 3-month low ahead of US inflation data

Gold prices fall to 3-month low ahead of US inflation data

Gold prices eased on Wednesday to a three-month low as an elevated dollar continued to restrain bullion while investors await monthly U.S. inflation data, which could have some impact on the Federal Reserve's monetary policy stance.

Spot gold was down 0.1% at $1,838.26 per ounce, as of 0330 GMT, after hitting its lowest since Feb. 11 earlier in the session. U.S. gold futures dipped 0.2% to $1,836.50. U.S. consumer price index (CPI) data for April is due at 1230 GMT.

The markets have priced in the current move in real yields ahead of CPI data. Higher real yields have been driving gold lower and supporting the USD despite nominal yields easing, said Stephen Innes, managing partner at SPI Asset Management. Analysts expect the CPI data to show a sharp pullback in monthly growth, cooling to 0.2% in April from 1.2% in the prior month, and an annual increase of 8.1%. The dollar hovered near recent 20-year highs, making greenback-priced bullion less attractive for other currency holders.

"The problem for gold investors and other commodities that have been used as an inflation hedge is that the Fed will at all costs raise rates to snuff out the inflation fires," Innes said.

Fed officials on Tuesday