Gold gains 0.7% ahead of US ISM PMI

Gold prices traded higher during Asian trading on Thursday, as a stronger US dollar, elevated oil prices and higher Treasury yields offset softer-than-expected core PCE inflation data released overnight.

By 4:30 pm AEST (6:30 am GMT), spot gold was trading 0.7% higher at US$4,186.31 an ounce.

Elevated oil prices continued to fuel inflation concerns, keeping US Treasury yields supported across the curve and underpinning the US dollar.

However, sentiment briefly shifted in favor of gold after the core Personal Consumption Expenditures (PCE) Price Index increased 3% year-on-year in August, below expectations for a 3.3% rise.

The softer inflation data weighed on expectations for a Federal Reserve interest rate hike in October, with markets pricing in a 37.6% probability of such a move, down from above 70% at the start of the week, according to the CME Group FedWatch Tool.

The relief for gold buyers was short-lived, however, as stronger-than-expected US second-quarter gross domestic product (GDP) and ADP private payrolls, alongside persistent oil-driven inflation risks and elevated Treasury yields, weighed on the non-yielding precious metal.

Investors will now assess US jobless claims, the ISM Manufacturing PMI and comments from Federal Reserve officials for further signals on the central bank's interest rate outlook, with the data expected to influence the US dollar, Treasury yields and gold prices.