Gold holds steady as all eyes on US inflation print

Gold prices held steady on Monday as investors looked towards this week's U.S. inflation data to gauge the size of an expected Federal Reserve rate cut.

Spot gold GOLD was at $2,498.06 per ounce by 1146 GMT. U.S. gold futures GOLD rose 0.1% to $2,527.20.

Traders see a 75% chance of a 25-basis-point cut at the Fed's meeting next week, and a 25% chance of a 50-bp reduction. August U.S. consumer price data on Wednesday could change these expectations. Eyes are also on Thursday's Producer Price Index (PPI). (FEDWATCH)

"If inflation numbers come much lower than expected and raise hopes for a 50-bp cut, then gold could hit all-time highs. But even if the consensus stays for a 25-bp cut, gold wouldn't see a dramatic loss in prices as the Fed is definitely cutting rates," Kinesis Money market analyst Carlo Alberto De Casa said.

"The key support area is at $2,470 and key resistance at $2,520," he added.

Last week, a report showed U.S. employment increased less than expected in August, but a drop in the jobless rate to 4.2% suggested the labour market was not falling off a cliff to warrant a half-point cut.

Fed Governor Christopher Waller on Friday said he could support back-to-back cuts, or bigger cuts, if the data suggest the need. Chicago Fed President Austan Goolsbee said he wants to calibrate policy based on data as it comes in.

Bullion, which offers no interest of its own, tends to thrive in a low interest rate environment.

Meanwhile, the People's Bank of China held back on buying gold for its reserves for a fourth straight month in August, official data showed on Saturday.