Gold resumes gains ahead of US inflation data

Gold prices rose on European markets on Wednesday to resume gains that were halted for two days on correction and profit taking from a 14-month high, on the back of the US dollar's decline ahead of major US inflation data, especially as investors' demand on the metal as a safe haven rose amid fears of the US-China trade war.

As of 10:27 GMT, gold prices rose by 0.7% to trade at $1,335.55 per ounce from the opening level of $1,326.57, and recorded a high of $1,338.37and a low of $1,326.02.

Yesterday, gold prices lost 0.1%, the second consecutive daily loss, with corrections and profit taking from a 14-month high of $1,348.26 per ounce.

The dollar index fell more than 0.1% on Wednesday, continuing its losses for the second day in a row, approaching the lowest level in two months, reflecting the continued decline of the dollar against a basket of major and secondary currencies.

The drop in dollar levels comes as the Federal Reserve is likely to cut interest rates this year, as US President Donald Trump's administration continues to pressure monetary policy makers to cut interest rates to support the administration in its trade wars against several countries.

These prospects also increased after the weak economic data from the United States, which increased the signs of global economic slowdown in the second quarter of this year.

According to the FedWatch tool of the CME, the market is pricing the possibility of a US interest rate cut of around 78% in July and about 97.1% for price cuts by December.

In order to reassess those possibilities, investors are anticipating major US inflation data later in the day, which in case of a negative data release will reinforce those odds and vice versa.

Investment demand has rekindled the precious metal as a safe haven, amid fears of a worsening trade war between the United States and China.

US President Donald Trump on Tuesday defended the use of tariffs under his trade strategy from one side, and China has vowed a tough response if US tariffs on Chinese goods are raised again amid ongoing negotiations between the two countries for a comprehensive trade deal.

Gold holdings with SPDR Gold (Trust The largest global gold-backed index fund) fell yesterday by 0.24 metric tons to bring the total down to 756.18 metric tons, the lowest level this month.