* U.S. CPI report due at 1230 GMT
* ‘Persistent’ ECB won’t tighten too early, Lagarde says
* Dollar index up 0.1% (Recasts, adds comments, updates prices)
July 13 (Reuters) – Gold prices were trapped in a tight range as investors awaited U.S. inflation data on Tuesday that could provide more clarity on the Federal Reserve’s timeline for policy tightening.
Spot gold was up 0.1% at $1,808.20 per ounce by 0854 GMT. U.S. gold futures were 0.2% higher at $1,808.70.
“If we get a slightly hotter inflation print today that could exert upward pressure on the U.S. 10-year yields, which in turn could exert downward pressure on gold,” said CMC Markets UK’s chief market analyst Michael Hewson.
After the U.S. consumer price index due for release at 1230 GMT, the focus turns to Fed Chairman Jerome Powell’s testimony before Congress on Wednesday and Thursday for his response to the inflation data and possible tapering measures.
Following a hawkish tilt from the U.S. central bank last month, Powell said the Fed would not raise interest rates too quickly based only on the fear of coming inflation.
Though gold is considered a hedge against inflation, a Fed rate hike would dull its appeal as that increases the opportunity cost of holding the non-yielding metal.
The dollar index edged 0.1% against rivals, making gold less appealing for other currency holders.
“The fact that the Fed and the ECB are likely to diverge when it comes to monetary policy over the course of the next 6 to 12 months, there is a potential for the dollar to go higher and that could constrain to a certain extent the upside in gold prices,” Hewson added.
The European Central Bank has pledged to be “persistent” and will not repeat its past mistake of tightening policy too early, its president Christine Lagarde said on Tuesday.
Elsewhere, silver rose 0.2% to $26.23 per ounce, palladium fell 0.8% to $2,833.41 and platinum eased 0.1% to $1,116.19. (Reporting by Brijesh Patel in Bengaluru; editing by Jason Neely)
