Investing.com - Gold futures rallied to hit a one-week high on Tuesday, as investors looked ahead to Wednesday's minutes of the Federal Reserve's June meeting for further hints regarding the direction of U.S. monetary policy.
Gold was further supported after data showed that inflation in China accelerated at a faster rate than expected last month.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,250.95 a troy ounce during U.S. morning hours, up 1.3% on the day.
Comex gold prices rose by as much as 1.9% earlier in the session to hit a daily high of USD1,258.65 a troy ounce, the strongest level since July 2.
Gold futures were likely to find support at USD1,180.35 a troy ounce, the low from June 28 and a 34-month low and near-term resistance at USD1,267.35, the high from July 2.
The precious metal extended gains from the previous session as traders closed out bets on lower prices after futures moved into oversold territory, a move known as covering a short position.
Gold prices tumbled nearly 3% on Friday after the Department of Labor said the U.S. economy added 195,000 jobs in June, more than the 165,000 increase forecast by economists.
Fed Chairman Ben Bernanke said last month the bank could begin tapering its USD85 billion-a-month asset purchase program by the end of 2013 and wind it down completely by the middle of 2014 if the economy picks up as the central bank expects.
Gold prices are on track to post a loss of 27% on the year, the worst yearly decline since 1981, amid speculation the Fed will start to unwind its stimulus program by the year's end.
Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.
Meanwhile, in China, official data released earlier showed that consumer prices rose 2.7% in June from a year earlier, above expectations for a 2.5% increase and accelerating from a 2.1% rate of increase in May.
Gold is considered a hedge against inflation risk and gold prices tend to keep in step with consumer price increases.
Elsewhere on the Comex, silver for September delivery jumped 1.1% to trade at USD19.24 a troy ounce, while copper for September delivery fell 1.4% to trade at a one-week low of USD3.057 a pound.
Copper came under pressure as the faster-than-expected increase in the rate of inflation dampened hopes policy makers in Beijing could introduce fresh easing measures to boost economic growth in the world's second largest economy.
The Asian nation will release a report on trade balance figures on Wednesday.
China is the world's largest copper consumer, accounting for almost 40% of world consumption last year.
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