Gold steady after US inflation spurs biggest drop in two months

Gold slipped below $1,700 an ounce after closing down the most in two months in the wake of higher-than-expected US inflation data.

Bullion ended 1.3 per cent lower on Tuesday after the consumer-price index figures were released. It had been on an upward trend this month before the inflation data surprised markets.

Economists had expected the CPI to rise 8.1 per cent in August from a year earlier, but the actual figure was 8.3 per cent, prompting stocks to plummet and the dollar and Treasury yields to surge.

Gold dipped below the $1,700 mark has been seen by some market analysts as a floor for the gold price so far this month. That threshold could be threated as the CPI report will keep the Federal Reserve on a hawkish track ahead of its meeting next week. Higher rates tend to weigh on non-interest bearing bullion.

Gold was down 0.2 per cent to $1,698.30 an ounce at 9.25am in Singapore. The Bloomberg Dollar Spot Index was steady after rising 1.2 per cent on Tuesday.

Spot silver and palladium declined, while platinum was flat.