Gold listless as market awaits US inflation cues

Gold prices were little changed on Wednesday as investors looked ahead to US inflation data that could shape the course of the Federal Reserve's monetary policy.

Spot gold was holding steady at $1,893.60 per ounce at 10:08 a.m. EDT (1408 GMT), while US gold futures were up 0.2% to $1,897.20.

Traders will keep their eyes peeled on Thursday's US consumer price index report for any signs the Fed could begin to step back from its ultra-loose monetary policy. Market participants will also keep close tabs on a European Central Bank meeting on the same day.

The underlying fundamentals remain favourable for precious metals as the Fed seems to be "stubbornly" holding on to the idea that current inflationary trends are transitory and thus are likely to keep monetary policy loose for the time being, said David Meger, director of metals trading at High Ridge Futures.

While there could be a knee-jerk reaction in the market if inflation runs "hotter than expected," the Fed will still likely hold onto its view that a jump in inflation is transitory, Meger added.

The US central bank will hold a two-day policy meeting next week.

Gold is considered a hedge against inflation, which could be triggered by the widespread printing of money undertaken by central banks around the world largely to stem the economic fallout of the coronavirus pandemic.

Gold prices, however, are increasingly vulnerable to a near-term pullback as speculative flows are now slowing alongside physical flows, amid India's battle against COVID-19 and waning Chinese demand, TD Securities wrote in a note.

Meanwhile, market participants also took stock of data from China - the world's biggest gold consumer - that showed May factory gate prices rose at their fastest pace in over 12 years, while consumer prices increased for the third straight month.

Among other precious metals, silver rose 0.9% to $27.87 per ounce, palladium eased 0.6% to $2,789.36, while platinum fell 0.4% to $1,156.40.