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Gold Price Declines Ahead of US Inflation Data, Silver Gains Marginally

Gold prices fell on Monday as investors awaited crucial U.S. inflation data that could provide clues about the Federal Reserve’s timing for its initial rate adjustment. By 1204 GMT, spot gold had declined by 0.7% to $2,344.53 per ounce, following a recent peak on Friday, the highest since April 22. U.S. gold futures also dropped about 1% to $2,350.80. This marks gold’s most significant daily drop in nearly two weeks.

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The U.S. is set to release the producer price index (PPI) data on Tuesday, followed by the consumer price index (CPI) on Wednesday. “Gold prices are trading slightly lower today amid profit-booking and a stronger U.S. dollar,” said Pranav Mer, VP of Research (Commodity & Currency) at BlinkX and JM Financial. “Focus is turning to the U.S. inflation data and the Fed Chairman’s comments later in the week. Currently, markets are pricing in a 65-67% chance of a rate cut at the Fed’s September meeting. Signs of cooling inflation would increase those bets, but a higher reading could push back rate cut expectations to November.”

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Factors Weighing on Gold Prices

According to a Reuters poll, core consumer prices are expected to increase by 0.3% in April, down from 0.4% in March, potentially lowering the annual rate to 3.6%. Last week, gold prices rose over 1% following weak jobs data, which bolstered expectations of a potential U.S. rate cut this year. The CME FedWatch Tool indicates a 63% probability of a rate cut in September. Lower interest rates reduce the opportunity cost of holding gold, which does not yield interest, making it a more attractive investment.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, expressed uncertainty about the future direction of monetary policy on Friday, reflecting the current economic conditions.

Performance of Other Precious Metals

In other precious metals, spot silver increased by 0.4% to $28.27 per ounce, platinum rose by 0.9% to $1,002.65, and palladium saw a 0.5% uptick to $982.75.

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