Gold near 3-week high

Gold prices were firmer near three-week highs on Wednesday as investors held their breath ahead of the much anticipated US inflation data that could drive the Federal Reserve’s upcoming interest rate decisions.

Spot gold gained 0.1% to $1,934.07 per ounce by 1023 GMT, while U.S. gold futures added 0.1% to $1,939.40.

Prices touched their highest since June 20 earlier in the session as the dollar index (.DXY) slid to its weakest level in two months, making bullion cheaper for overseas buyers.

The U.S. currency’s overall weakness suggests investors are anticipating a weaker inflation report, said Fawad Razaqzada, market analyst at City Index.

The CPI data is due at 1230 GMT. Economists polled by Reuters expect the June core inflation rate to have dropped to 5% from 5.3%, still significantly above the Fed’s 2% target.

Such a scenario “would be likely to drive further dollar weakness and lower yields, with gold prices set to benefit,” said ActivTrades senior analyst Ricardo Evangelista.

Friday’s slower than expected jobs report wasn’t a game changer, but helped shift the mindset of investors, with many now expecting July to mark the end of the current hiking cycle, Evangelista added.

The end to Fed’s current monetary policy tightening cycle is getting close, several U.S. central bank officials also said on Monday. That helps bullion as it does not yield any interest.

Harshal Barot, senior consultant at Metals Focus, said that while a July rate hike is largely priced in, “if we see core inflation still being higher than expected, then I think the expectations of another rate hike coming September will start gaining traction.”

In other metals, spot silver gained 0.2% to $23.16 per ounce, platinum rose 1.1% to $933.94 while palladium climbed 0.8% to $1,261.58.