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spot gold: Gold hits 4-week low as dollar firms before US inflation test

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Gold hit a four-week low on Tuesday as the dollar climbed after weaker-than-expected Chinese trade data, while caution in the run-up to US inflation readings this week also kept appetite for zero-yield bullion subdued.

spot gold was down 0.4% to $1,928.61 per ounce by 1200 GMT after hitting its lowest since July 11. US gold futures fell 0.4% to $1,963.00.

« China’s weak trade data has resulted in a general risk-off sentiment. The haven of choice today has been the greenback, which has put pressure on the precious metal, » said FXCM market specialist Russell Shor.

The dollar gained 0.6% but losses for dollar-priced bullion were capped by a downturn in benchmark 10-year Treasury yields from November 2022 highs hit on Friday. [USD/] [US/]

« Gold prices remain under pressure from the recent rise in US bond yields and after Fed’s Bowman said more rate hikes may be needed, » said Saxo Bank‘s head of commodity strategy Ole Hansen.

Fed Governor Michelle Bowman on Monday outlined the likely need for additional rate hikes to lower inflation to the Federal Reserve’s 2% target, while New York Fed chief John C. Williams expected that rates could begin to come down next year.

« The sixty-four-dollar question this week is the US inflation outcome, » said Clifford Bennett, chief economist at ACY Securities. A hotter-than-expected CPI number on Thursday could raise the possibility of another rate hike in September.

« The market already knows headline inflation is trending lower, but any firmness in the data could be a fresh downward catalyst for gold in the short term, » Bennett added.

Rate hikes tend to lift bond yields, raising the opportunity cost of holding zero-yielding bullion.

Reflecting sentiment, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to a five-month low on Monday. [GOL/ETF]

Silver dropped 0.9% to $22.95 per ounce, platinum eased 1.5% to $905.78, while palladium shed 2.3% to $1,211.96.

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