US gold futures dropped sharply to small overnight gains near $ 1,110 an ounce on Friday amid stronger than expected inflationary pressures for the last month domestic producers as, strengthening the case for a rise in interest rates by the Federal Reserve next week.
On the Comex Exchange, gold for December delivery wavered between $1,097.80 and $1,111.90 an ounce, before settling at $1,104.20, down 5.20 or 0.47% for the session.
Spot gold was little changed at $ 1,111 an ounce, after gaining 0.5 percent in the previous session in Singapore.
On Friday morning, the Department of Labor Bureau of Labor Statistics of the United States (BLS) reported that its headline producer price index for August was unchanged in August after an increase of 0.2% last month.
The reading was substantially greater than the lower end of the consensus estimates of a drop of 0.6%. Meanwhile, the FD-Core PPI, which excludes prices of food and energy, ticked up to 0.3%, marking its third consecutive month of significant gains. On an annual basis, the core reading has increased by 0.9%, supporting the views of hardline for imminent rate hike.
While the Fed Open Market Committee (FOMC) would like to see the long-term inflation reaching a specific target of 2% before the Fed raises its interest rate benchmark for the first time in almost a decade, vice president Stanley Fischer has indicated that the USA central bank could normalize policy before it reaches the threshold.
The long-term inflation has been maintained below 2% in each month for the past three years.
Traders were looking forward to next policy statement by the Fed on Sept. 17 for clues about when to a rise in interest rates in the US, before taking any large positions in gold.
Concerns about the deceleration of growth in China, mixed economic data and volatility in financial markets have increased uncertainty over the timing of a rate increase in the United States, expected as early as this month.
MCX gold is trading around 0.16 per cent decline at Rs 26120.
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