Gold dips as wary investors turn to the dollar ahead of US inflation data

Gold prices fell on Monday, taking their cue from a stronger dollar as investors cautiously looked forward to US inflation data which could have a bearing on the US Federal Reserve's timeline for easing its bond purchases.

Spot gold was down 0.2% at $1,804.76 per ounce by 10:34 am EDT. US gold futures slipped 0.7% to $1,798.00.

The dollar index rose 0.1% against its rivals, raising gold's cost for holders of other currencies.

Investors will focus on a US consumer price index report due Tuesday, and Federal Reserve Chair Jerome Powell's testimony before Congress on Wednesday and Thursday for cues on the timeline for policy tightening.

Gold dips as dollar claws up, equities firm

"We're almost in this environment where good news is bad news and bad news is good news" said David Meger, director of metals trading at High Ridge Futures, referring to the CPI data and it's impact on Fed policy.

If inflation data becomes more benign, the Fed would feel slightly less inclined to ease its asset purchases which should benefit gold, but if they are concerned about inflation, they're more likely "to tap the brakes" on such purchases, weighing on gold, Meger added.

Economists polled by Reuters expect US consumer prices for June to have risen 0.4% from May and 4.0% from a year earlier.

Market participants also largely ignored a spike in cases of the Delta variant of the coronavirus in some countries.

While the rapidly spreading Delta variant makes more headlines, rangebound trading in the gold and silver markets suggests that safe-haven seekers are not concerned, Carsten Menke, analyst at Julius Baer said.

Spot gold may rise to $1,813

A broad-based economic impact of the Delta variant seems very unlikely, so safe-haven demand for gold and silver is unlikely to pick up in the short term, he added.

Elsewhere, silver rose 0.4% to $26.17 per ounce, palladium gained 1.3% to $2,845.04 and platinum rose about 1% to $1,114.46.