Gold prices held broadly steady on Wednesday but remained on track for a sharp monthly decline as expectations of higher US interest rates continued to weigh on demand for the non-yielding metal.
Spot gold was little changed at $4,180.30 an ounce as of 0435 GMT, but the precious metal had fallen about 6% so far this month. US gold futures, however, were up 0.8% at $4,212.70.
The market's attention has now turned to the latest US personal consumption expenditures (PCE) price index, due at 1230 GMT. The inflation reading is closely watched because it could influence expectations about the Federal Reserve's interest-rate path, while also affecting US Treasury yields and the dollar.
Tony Sage, CEO of Critical Metals, said the data would provide an important test for gold.
"The PCE data release will be an important test for gold as it could influence expectations for US monetary policy, and the direction of Treasury yields and the dollar," Sage said.
He said a weaker-than-expected inflation reading could provide some relief for gold, while a hotter figure could increase pressure on the metal.
"A softer reading would likely support gold and open the way for a return to the $4,200-4,300 range, while a hotter number could push yields and the dollar higher, putting renewed pressure on gold and testing the $4,100 level," he said.
Higher rates weigh on gold
Gold typically faces pressure when interest rates rise because the metal does not generate interest or other regular income. As yields on interest-bearing assets increase, investors may have less incentive to hold a non-yielding asset.
The US Federal Reserve raised interest rates by 25 basis points this month, adding to expectations that monetary policy could remain tight for longer.
According to the CME FedWatch Tool, traders were pricing in a 47% probability of another Fed rate increase in October and a 92% probability of a hike in December.
Those expectations have contributed to the pressure on gold, particularly as investors reassess how far the US central bank may need to go to bring inflation back toward its target.
New York Federal Reserve President John Williams said policymakers would probably need only one more rate increase this year to bring inflation back on track toward the Fed's 2% target.
His comments have added to the focus on the central bank's next decisions, with investors looking closely at economic data for indications of whether inflation is proving persistent enough to warrant further tightening.
Dollar adds to pressure
The US dollar was also heading for a monthly gain, creating another headwind for gold and other commodities priced in the greenback.
A stronger dollar generally makes dollar-denominated commodities more expensive for buyers using other currencies, potentially reducing demand.
The combination of a firmer dollar, higher-rate expectations and elevated Treasury yields has therefore kept investors cautious toward precious metals.
Iran diplomacy in focus
Geopolitical developments also remained on investors' radar.
Qatar said it hoped shuttle diplomacy between Tehran and Washington could produce a breakthrough, despite US President Donald Trump denying reports that he would ease sanctions on Iran and release frozen Iranian funds in exchange for nuclear concessions.
Any meaningful shift in US-Iran relations could influence broader market sentiment, particularly given the role geopolitical tensions can play in driving demand for traditional safe-haven assets such as gold.
Other precious metals also under pressure
Gold was not alone in facing a difficult month.
Spot silver fell 0.6% to $61.07 an ounce, while platinum declined 0.2% to $1,703.19. Palladium also slipped 0.2% to $1,220.61.
All three metals were on course for monthly declines.
For gold traders, however, the immediate focus remains on the US inflation figures. The data could provide another indication of whether the Federal Reserve is likely to maintain its restrictive policy and could determine whether gold finds support around current levels or faces another leg lower.