Gold falls ahead of US inflation data on firm yields, dollar

Gold prices fell on Wednesday, weighed down by higher U.S. Treasury yields and a slight rebound in the dollar ahead of the much-awaited US consumer price data due later in the day.

Spot gold was down 0.6 per cent at $1,826.89 per ounce by 8:43 am. US gold futures eased 0.5 per cent to $1,826.20.

"The dollar has strengthened a little bit... if the inflation rate is higher than expected, it could encourage central banks to consider tightening their monetary policies faster than expected," said Margaret Yang, a strategist at DailyFX.

The dollar index was up 0.3 per cent, making gold less appealing for other currency holders.

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Concerns of a potential acceleration in inflation dragged down the US currency to a more than two-month low in the previous session and drove Asian shares to one-month lows earlier on Wednesday.

The US consumer price data due at 6:00 pm is keenly awaited by market participants to gauge inflationary pressure.

Benchmark US 10-year Treasury yields scaled a more than one-week peak, increasing the opportunity cost of holding gold.

Some investors view gold as a hedge against higher inflation that could follow stimulus measures, but higher Treasury yields have weighed on non-yielding bullion's appeal this year.

Fed officials grappled on Tuesday with April's unexpectedly weak employment growth, maintaining faith in the U.S. economic recovery but acknowledging the pace of the jobs recovery may prove choppier than anticipated.

Data on Tuesday showed US job openings surged to a record in March, reiterating that a shortage of workers was hampering job growth, even as nearly 10 million Americans are looking for employment.

Palladium rose 0.2 per cent to $2,944.02 per ounce. Silver fell 1.1 per cent to $27.34 per ounce, while platinum slipped 0.7 per cent to $1,226.82.