Gold prices weakened slightly on Friday (August 29th), but are expected to post a monthly gain ahead of US inflation data that will provide more clues about the Federal Reserve's rate cut path.

Spot gold fell 0.1% to $3,414.07 per ounce, as of 08:18 GMT. Bullion has gained 3.6% in August and reached $3,423.16 on Thursday, its highest level since July 23rd.

US gold futures for December delivery fell 0.1% to $3,471.70. "In addition to a slight strengthening dollar, gold is also feeling the gravitational pull typically found around large round numbers. The market seems reluctant to allow gold to stray far from the psychological $3,400 level ahead of the PCE data," said Han Tan, chief market analyst at Nemo.Money.

The dollar is expected to experience a monthly decline of 2.2%. The benchmark 10-year yield is slightly above the two-week low reached on Thursday, but is headed for a monthly decline. All eyes are on the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, due later today.

"As long as the inflation increase is not worse than feared, bullion investors should be able to maintain their positions above $3,400. However, if the PCE figure crushes market expectations for a Fed rate cut this year, spot gold may fall back below $3,400," Tan said.

Non-yielding gold typically performs well in a low-interest rate environment. Fed Chairman Waller on Thursday stepped up his calls for lower short-term borrowing costs in the US, saying he would support a rate cut next month.

Traders are pricing in an 85% chance of a 25 basis point rate cut at the September policy meeting, according to the CME FedWatch Tool. Meanwhile, physical gold demand in India increased slightly this week, despite a recovery in prices, as jewelers stockpiled gold ahead of the holiday season.

Spot silver fell 0.4% to $38.91 an ounce, platinum fell 1.1% to $1,343.98, and palladium fell 0.3% to $1,099.0.(alg)

Source: Reuters