Gold holds steady as traders await US inflation data for Fed clues

Production at Krastsvetmet precious metals plant in Krasnoyarsk

By Brijesh Patel

(Reuters) - Gold prices were little changed on Tuesday as the dollar held firm and Treasury yields ticked higher, while investors looked forward to the U.S. June inflation data due later this week for more clarity on the U.S. interest rate path.

Spot gold was flat at $2,359.83 per ounce as of 12:17 p.m. ET (1617 GMT), after dropping more than 1% in the previous session. U.S. gold futures were up 0.2% at $2,367.

The dollar was up 0.1% against its rivals, making gold more expensive for other currency holders, while benchmark 10-year Treasury yields inched higher. [USD/ [US/]

There's an expectation that the Federal Reserve is more likely to start cutting rates as early as September, which is contributing positively to current market conditions, said Bart Melek, head of commodity strategies at TD Securities.

Recent U.S. economic data pointed to a slackening labour market, cementing expectations that the U.S. central bank is on course to start cutting interest rates soon.

However, Fed Chair Jerome Powell said in congressional testimony on Tuesday that inflation remains above the Fed's 2% target, but has been improving in recent months and more good data would strengthen the case for central bank interest rate cuts.

Focus now shifts to the consumer price index (CPI) data on Thursday, with recent numbers showing a cooling from unexpectedly high levels at the start of the year.

If markets are shown evidence of still-stubborn U.S. inflation, that may prompt the precious metal to unwind more of its recent gains, said Han Tan, chief market analyst at Exinity Group.

Traders currently see about a 75% chance of a rate cut in September, according to the CME Group's FedWatch Tool. Non-yielding bullion's appeal tends to grow when interest rates are lower.

Elsewhere, spot silver eased 0.1% to $30.75 per ounce, platinum fell 1% to $986.20 and palladium slipped 2.5% to $984.

(Reporting by Brijesh Patel and Daksh Grover in Bengaluru; Editing by Keith Weir and Emelia Sithole-Matarise)