Investing.com – Gold prices inched higher on dollar weakness but gains were limited by expectations the Federal Reserve will hike rates for the second time this year at 2PM ET.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange rose by $2.60 or 0.20%, to $1,302.80 a troy ounce after falling to a session low of $1,301.90.
The move higher in the gold emerged as better-than-expected U.S. wholesale inflation data failed to attract a bid in the greenback, which languished near session lows, increasing demand for gold.
The Labor Department said on Wednesday its producer price index for final demand increased 0.5% last month, topping expectations for a 0.3% rise. In the 12 months through May, the PPI rose 3.1.% after rising 2.6% in April.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – A fall in the dollar makes gold cheaper for holders of foreign currency and thus, increases demand for the precious metal.
Traders were wary, however, of betting on further upside in gold amid uncertainty on the pace of rate hikes ahead of the Federal Reserve's interest rate decision and summary of economic projections.
Investors are anxiously awaiting the Fed's update on monetary policy to assess whether the policymakers had grown more hawkish amid a slew of positive economic data.
Against the backdrop of strong U.S. economic growth, spurring expectations for a faster pace of U.S. monetary policy tightening, safe-haven assets such as gold and, to a lesser extent silver, are losing their attractiveness, said FocusEconomics in its Consensus Forecast - Commodities - June 2018 report.
In a rising interest rate environment, investor appetite for gold weakens as the opportunity cost of holding the precious metal increases relative to other interest-bearing assets such as bonds.
In other precious metal trade, silver futures rose 0.62% to $16.99 a troy ounce, while platinum futures were flat at $901.50 an ounce.
Copper rose 0.08% to $3.25.