Bullion cools ahead of US CPI, PPI data

Gold prices in Pakistan declined for a second consecutive session on Tuesday, tracking a softer international market where the metal inched lower as rising oil prices fuelled inflation concerns and strengthened expectations of a Federal Reserve rate hike later this month.

According to rates issued by the All-Pakistan Gems and Jewellers Sarafa Association, the 24-karat gold fell Rs1,000 per tola to Rs462,136. Ten-gram gold was quoted at Rs396,207 after a drop of Rs857.

The local market has lost Rs3,400 per tola over two days. On Monday, gold had already declined Rs2,400 per tola. Silver moved in the opposite direction, rising Rs10 to Rs7,069 per tola.

In global markets, spot gold fell 0.1% to $4,398.71 an ounce by 11:42 am EDT (1542 GMT), after trading as high as about $4,442 earlier in the session, as per Reuters. US gold futures for December delivery dropped 0.7% to $4,443.60.

Traders remained cautious ahead of a heavy US data calendar. Producer Price Index (PPI) figures are due on Thursday and Consumer Price Index (CPI) data on Friday. Both reports will help shape expectations for the Federal Reserve's September policy meeting.

Oil prices extended gains to multi-week highs, adding to inflation worries. Although gold is often viewed as a hedge against rising prices, higher interest rates reduce the appeal of the non-yielding metal.

Spot gold had already fallen 2.4% on Friday after stronger-than-expected US jobs data pointed to a resilient labour market. That report lifted the odds of a rate increase at the Fed's mid-September meeting and left bullion on the defensive into this week.

Adnan Agar, Director at Interactive Commodities, said activity was muted. "The gold market was quite slow and cool because it was eagerly awaiting the US inflation data coming out this Friday. That's why there wasn't much major activity in gold; it's almost similar to yesterday's (Monday's) activity," he said.

He put Tuesday's high around $4,442 and the low near $4,380, with prices later hovering around $4,385. "Expectations for Friday's data are that it will likely favour gold. On the lower side, even if gold drops, $4,280 is a major support area. If it falls below that, it could head towards the $4,000 area. However, as long as it stays above $4,280, there are strong chances the market could push towards the $4,600 to $4,800 levels," Agar added.

Meanwhile, the Pakistani rupee extended its slight gains in the inter-bank market, closing at 277.37 against the US dollar, up Rs0.03, or 0.01%, from Monday's close at 277.40.

The move was modest and in line with recent stability in the local unit. Internationally, the dollar stayed subdued ahead of the US CPI data, while the Japanese yen climbed to fresh seven-month highs as traders unwound short positions on growing bets of a Bank of Japan rate hike.