Gold slips as dollar firms with a focus on US inflation data

Gold prices slided on Tuesday_ pressured by an uptick in the greenback_ and as traders looked ahead to key US inflation figures this week that could influence the Federal Reserve's rate-hike narrative.

Spot gold was down 0.3 per cent at $1_669.73 per ounce_ as of 0615 GMT. Prices hit a three-week peak in the previous session_ buoyed by a weaker dollar.

U.S. gold futures fell 0.5 per cent to $1_672.70.

The dollar index ticked 0.2 per cent higher_ making bullion more expensive for overseas buyers.

While gold managed to close near its three-week high on Monday_ it has hit resistance around $1_680_ potentially spurring some wait-and-see for a greater catalyst to induce an upward break_ said IG market strategist Yeap Jun Rong.

The U.S. consumer price index report is due on Thursday.

"A higher-than-expected inflation reading could fan fears of more aggressive rate hikes_ which will provide a negative backdrop for non-yielding gold_" Yeap added.

Gold is considered a hedge against inflation_ but rising interest rates increase the opportunity cost of holding the asset.

Holdings of SPDR Gold Trust_ the world's largest gold-backed exchange-traded fund_ fell to 905.48 tonnes on Monday_ their lowest since early 2020.

Investor focus is also on the U.S. midterm elections later in the day that will determine control of Congress and could spur moves all over the market. A conclusive result could take days.

"Outflows from gold ETFs are weighing on gold ... This in conjunction with persistently high inflation and U.S. midterm elections should see gold under pressure leading into Thursday_" said Michael Langford_ director at corporate advisory firm AirGuide.

"The U.S. midterm elections are more likely to see investors repositioning towards higher risk asset classes and reduce exposure to gold."

Market participants also kept a close tab on any news surrounding COVID-related curbs in top bullion consumer China.

Spot silver was down 1 per cent at $20.56. Platinum fell 0.4 per cent to $975.19 and palladium slipped 0.5 per cent to$1_887.17.