Gold dips on firmer dollar; attention on Fed cues

Oct 14 (Reuters) – Gold prices eased on Monday, weighed down by a firmer U.S. dollar, while investors looked out for fresh clues on Federal Reserve interest rate cuts.

Spot gold fell 0.2% to $2,651.99 per ounce by 0252 GMT after rising 1% in the previous session. U.S. gold futures lost 0.3% to $2,669.20.

The dollar index (.DXY),  rose 0.1% on Monday, not far from a near two-month high hit last week. A stronger dollar makes bullion less attractive for other currency holders.

“The continued momentum of the U.S. currency on reigned-in rate-cutting expectations has created an obstacle for the gold price,” said Tim Waterer, chief market analyst at KCM Trade.

Traders see a roughly 89% chance of the Fed cutting rates by 25 basis points at its November meeting and an 11% chance it will leave rates unchanged.

Data on Friday showed unchanged U.S. producer prices last month.

The zero-yielding bullion is preferred in a low-interest rate environment as well as amid periods of economic and geopolitical turmoil.

Meanwhile, investors will watch out for comments from Fed officials this week for more hints on upcoming rate cuts, along with U.S. retail sales data.

“If the Fed speakers this week create some further doubt over how many rate cuts could occur between now and year-end, any resulting upside in the dollar could see gold support levels around $2,600 again being tested,” Waterer said.

Elsewhere, China said on Saturday that it would “significantly increase” debt to revive its sputtering economy, but left investors guessing on the overall size of the stimulus package. Data showed that China’s consumer inflation unexpectedly eased in September, while producer price deflation deepened.

Spot silver fell 1.3% to $31.1275 per ounce and latinum shed 1.2% to $972.90. Both metals snapped two-session winning streak.

Palladium extended its decline, falling 1.6% to $1,051.81.