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Gold rebounds as market's focus turns to US inflation data

Marked ingots of 99.99 percent pure gold are placed in a cart at the Krastsvetmet non-ferrous metals plant in Krasnoyarsk

By Harshit Verma

(Reuters) - Gold prices rebounded on Monday after the precious metal's biggest daily drop in three and a half years in the last session, as investors awaited U.S. inflation data and the Federal Reserve's decision on interest rates later this week.

Spot gold was up 0.8% at $2,310.81 per ounce as of 1817 GMT. U.S. gold futures settled about 0.1% higher at $2,327.

The sell-off on Friday seemed a bit excessive and "bargain hunters are surfacing at this lower price point," said Phillip Streible, chief market strategist at Blue Line Futures.

"There's so much data and so many events coming out ... so there's going to be more volatility and more fireworks this week."

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Bullion lost about $83 an ounce on Friday, declining 3.5% in its biggest one-day drop since November 2020 after a stronger-than-expected U.S. jobs report dented hopes for a September interest rate cut and reports that China's central bank was holding off gold purchases put off investors betting on Chinese demand.

"People's Bank of China (PBOC) has never been a constant buyer. There have been distinct phases of buying followed by multi-month breaks. But as long as the PBOC doesn't resume buying, gold prices could trade sideways because the China buying topic is a key market focus," said Carsten Menke, an analyst at Julius Baer.

Gold's tentative recovery occurred despite a rise in the dollar and U.S. Treasury yields, with the market's focus shifting to the release of the U.S. consumer price index report on Wednesday, the same day as the Fed's policy decision. [USD/]

The U.S. central bank is not expected to make any change to its policy rate this week, but the focus will be on policymakers' updated economic projections and Fed Chair Jerome Powell's news conference after the end of the two-day meeting.

Higher rates increase the opportunity cost of holding non-yielding bullion.

Spot silver rose 1.9% to $29.72 per ounce and platinum was up 0.8% at $973.60, while palladium fell about 0.9% to $904.25.

(Reporting by Harshit Verma and Rahul Paswan in Bengaluru; Editing by Arpan Daniel Varghese, Shinjini Ganguli, Paul Simao and Alan Barona)