Gold on track for monthly decline as investors brace for US inflation data

By Reuters News

By Ashitha Shivaprasad

Sept 30 (Reuters) - Gold prices fell on Wednesday and were headed for a monthly loss as expectations of higher interest rates weighed on sentiment, while investors awaited US inflation data for clues on the Federal Reserve's next policy move.

Spot gold was down 0.2% at $4,170.63 per ounce, as of 0150 GMT, and has lost more than 6% so far this month.

US gold futures gained 0.5% to $4,201.90.

The dollar was headed for a monthly gain, making greenback-denominated metals more expensive for holders of other currencies. USD/

The US personal consumption expenditures (PCE) price index is due at 1230 GMT.

"The PCE data release will be an important test for gold as it could influence expectations for US monetary policy, and the direction of Treasury yields and the dollar," said Tony Sage, CEO of Critical Metals. US/

"A softer reading would likely support gold and open the way for a return to the $4,200-4,300 range, while a hotter number could push yields and the dollar higher, putting renewed pressure on gold and testing the $4,100 level."

Higher interest rates typically reduce gold's appeal because the metal does not offer a yield.

According to CME's FedWatch Tool, traders see a 47% chance of a Fed rate increase in October and a 91% chance of a hike in December. The US central bank raised rates by 25 basis points this month.

Meanwhile, New York Fed President John Williams said that Fed policymakers probably only need to deliver one more hike this year to get inflation back on track to the central bank's 2% goal.

On the geopolitical front, Qatar said it hopes shuttle diplomacy between Tehran and Washington can yield a breakthrough, even after US President Donald Trump denied reports that he would ease sanctions and release frozen Iranian funds in return for nuclear concessions.

Spot silver fell 0.8% to $60.98, platinum steadied at $1,705.10 and palladium lost 0.3% to $1,219.60. All three metals were poised for monthly declines.

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