* US CPI report due at 08:30 a.m. ET, Wednesday
* Traders see 50% chance of September rate hike- CME FedWatch Tool
* Trump demands Iranian reparations (Adds closing prices)
Aug 11 (Reuters) – Gold edged lower on Tuesday, but hovered near a more than two-month peak hit earlier, with market participants awaiting key U.S. inflation figures that could shape expectations for the Federal Reserve’s policy path.
Spot gold was down 0.3% at $4,376.31 per ounce at 1:50 p.m. EDT (1750 GMT), after hitting its highest level since June 5 at $4,434.84 earlier in the session in an attempt to break above the 100-day moving average, which is currently at $4,387.92.
U.S. gold futures rose about 0.5% to settle at $4,441.10.
“The market is looking ahead to this week’s inflation data for some kind of confirmation that inflation is in check,” said Peter Grant, vice president and senior metals strategist at Zaner Metals, adding that a moderation in the annualized CPI should continue to be supportive for gold.
The U.S. consumer price report due on Wednesday and producer price data on Thursday are likely to shape monetary policy expectations after weak July U.S. jobs data on Friday led markets to scale back bets that the Fed would raise rates next month, prompting a 2.4% daily gain in gold.
“Gold is still fairly well bid at this point in the wake of last week’s jobs data disappointment, which eroded expectations for a rate hike in September,” Grant said.
Still, traders are pricing in about a 50% chance of a September hike, and a 79% chance in December, according to the CME FedWatch Tool.
Cleveland Federal Reserve Bank President Beth Hammack said on Monday she believed the time was right to begin raising rates gradually to avoid the need for sharper increases later.
A higher interest rate environment tends to reduce the appeal of non-yielding gold.
On the geopolitical front, U.S. President Donald Trump responded with his own demands to Tehran’s conditions for a peace deal, calling for Iran to pay compensation for those killed in wars, attacks and protests. Oil prices held near a one-week high.
Among other metals, spot silver slipped 1.4% to $64.8 per ounce, platinum lost 0.7% to $1,740.37, and palladium shed 1.3% to $1,365.60. (Reporting by Sukanya Mitra in Bengaluru. Editing by Mark Potter and Aurora Ellis)
