Gold Holds Steady As Dollar Slips Ahead Of US CPI Data

Gold prices held steady on Wednesday amid worries about slowing growth in China and fresh concerns over the health of the U.S. banking system.

Spot gold was marginally higher at $11,926.09 per ounce, while U.S. gold futures were virtually unchanged at $1,959.80.

Signs of increasing deflationary pressures in China revived concerns about an uneven economic recovery in the world’s second largest economy.

Government data showed earlier today that China’s consumer price inflation fell by 0.3 percent year-on-year in July, slipping into deflation for the first time in more than two years.

Factory gate prices extended declines for a 10th consecutive month, down 4.4 percent from a year earlier after a 5.4 percent drop the previous month.

Investors also fretted about the health of the U.S. banking system after Moody’s cut the credit ratings for 10 smaller and midsized lenders and put the credit ratings of six large U.S. banks under review for a possible downgrade.

The dollar index slipped in European trade ahead of U.S. inflation readings due this week that might influence the Fed’s rate trajectory.

Economists expect Thursday’s data to show U.S. consumer prices rose by an annual 3.3 percent in July, up from 3 percent in the previous month.

Fed Bank of Philadelphia President Patrick Harker indicated on Tuesday that the U.S. central bank could be at the end of its current rate-hiking cycle.

Harker also noted that the Fed will start to bring interest rates down sometime probably next year.

Separately, his Richmond counterpart Thomas Barkin argued that there is still time for Fed officials to study data before deciding whether a rate rise in September would be appropriate.

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