Gold subdued with focus on US Fed meeting, inflation data

Gold prices inched lower on Wednesday due to a slight uptick in US bond yields, although bullion was still stuck in a narrow range as investors looked forward to inflation data and Federal Reserve policy meeting next week, reports Reuters.

Spot gold was down 0.1 per cent at $1,960.49 per ounce by 09:40 a.m. EDT (1340 GMT). US gold futures fell 0.3 per cent to $1,976.50.

Benchmark 10-year Treasury yields ticked higher to 3.706 per cent, increasing the opportunity cost of holding non-interest bearing gold.

"Yields have remained relatively elevated keeping some light pressure on the gold market," said David Meger, director of metals trading, High Ridge Futures.

"Clearly inflation is still the main focal point of this market. At this point the expectation is that the Fed is going to pause. However, if those inflationary numbers remain extremely elevated, you could see a shift in outlook."

The US inflation report for May, due on June 13, ahead of the Fed meeting, will provide investors with more clarity about the health of the world's largest economy.

While traders anticipate a nearly 77 per cent chance that the Fed will hold interest rates in the 5 per cent-5.25 per cent range, they see nearly 54 per cent odds of another hike in July, according to the CME FedWatch tool.

Weaker US services sector growth data earlier this week also reinforced bets for the Fed to stand pat on interest rates at the June meeting.

Gold prices are highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.