Gold shakes off losses to edge up after US CPI data

Gold prices reversed early losses to edge up on Thursday after data showed US consumer prices increased more than expected last month.

Spot gold was up 0.2% to $1,891.21 per ounce by 9:55 a.m. EDT (1355 GMT), having earlier hit its lowest level since June 4 at $1,875.89.

US gold futures dropped 0.1% to $1,893.30 per ounce.

"The key takeaway (from the inflation data) is that this market is firmly believing that the US Federal Reserve is not going to change stance anytime soon and the (accommodative policy) playbook for gold remains," said Edward Moya, senior market analyst at OANDA.

Some pricing pressures remain for gold, but ultimately the belief that "runaway" inflation, which could trigger a Fed policy tightening, is unlikely and that should keep gold supported, Moya said, adding that the Fed's policy meeting next week could act as a near-term catalyst to push gold prices higher.

Data showed US consumer prices increased further in May as the coronavirus pandemic's easing grip on the economy continued to boost domestic demand. Weekly jobless claims also dropped to their lowest level in nearly 15 months.

But given that current price hikes are transitory and likely tied to the economic recovery, safe-haven demand should wane and gold prices should move lower, said Carsten Menke, an analyst at Julius Baer.

Investors also took stock of the European Central Bank policy decision to continue to run its emergency bond purchases at a higher pace than at the start of the year.

Gold's modest gains occurred in the face of a slight rise in US treasury yields.

Higher yields threaten gold's appeal as they raise the opportunity cost of holding non interest-bearing bullion.

Silver rose 0.4% to $27.87 per ounce, palladium dropped 0.6% to $2,763.02, while platinum was down 0.8% at $1,141.19.