Gold holds firm in pre-holiday trade with focus on U.S. data

Gold prices eked out gains on Friday ahead of a long holiday weekend as investors awaited U.S. inflation data due later in the day that could offer some clues to the Federal Reserve rate-hike path.

Spot gold rose 0.2% to $1,796.61 per ounce by 7:50 a.m. ET. U.S. gold futures gained 0.53% to $1,804.8.

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Gold prices are trading sideways around the $1,800 mark and “the willingness to take a big position on the bullish or bearish side around the holidays is also rather small,” said Quantitative Commodity Research analyst Peter Fertig.

However, investors are focusing on the personal consumption expenditures (PCE) data and indications of inflation moderating “would give the Fed one reason not to hike significantly more than they had already done,” Fertig added.

U.S. PCE data is due at 1330 GMT. Economists polled by Reuters expect the core PCE price index to rise 0.2% for November.

Bullion prices dropped more than 1% on Thursday after U.S. economic data highlighted the country’s economy rebounded faster than previously estimated, boosting the dollar and potentially setting the Fed on a keener path to fight inflation.

While gold is seen as an inflation hedge, rate hikes to tame soaring price pressure weigh on the non-yielding asset that pays no interest.

“Gold will get a boost if the data indicates that inflation has reined a little, which might raise expectations of the Fed slowing down on rate hikes,” said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.

Market participants also kept a close tab on rising COVID-19 infections in top gold consumer China that could have an impact on physical buying.