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Markets

Gold eases as dollar firms on bets for 'transitory' inflation

  • Gold slips below $1,900/oz mark.
  • US CPI rises 0.6% in May.
  • Palladium on track for a weekly decline.
11 Jun 2021

Gold prices edged lower on Friday as the dollar held steady with some investors betting on rising US consumer prices being temporary.

Spot gold was down 0.2% to $1,894.06 per ounce by 0913 GMT. US gold futures rose 0.1% to $1,898.40.

Inflation has come a little bit on the higher side versus expectations, "but the view remains that these inflation levels will level off from now on," UBS analyst Giovanni Staunovo said, adding gold is having difficulties sustaining above $1,900.

As long as it has difficulties to stay above that level "there will be some investors using that to sell gold or build up short positions," Staunovo added.

Data showed US consumer prices rose solidly in May, leading to the biggest annual increase in nearly 13 years, while jobless claims dropped to their lowest in nearly 15 months last week.

The dollar index rose 0.1%, reducing gold's appeal for investors holding other currencies.

But capping bullion's losses by reducing the opportunity cost of holding non-interest bearing metal, benchmark US Treasury yields touched a three-month low.

Meanwhile, the European Central Bank on Thursday kept its monetary policy unchanged and pledged a steady flow of stimulus over the summer.

Focus now shifts to Fed's June 15-16 policy meeting. A significant number of Fed watchers according to a Reuters poll have said the central bank would wait until later in the year before announcing a taper.

"The FOMC next week is now likely to be a non-event, and barring a sharp rise in the dollar. Gold looks set to test resistance at $1,920 early next week, as the asset price appreciation trade gains new momentum," said Jeffrey Halley, senior market analyst at OANDA.

Silver rose 0.7% to $28.17 per ounce, while platinum gained 0.1% to $1,152.55.

Palladium fell 0.2% to $2,770.47, and was on track for a weekly decline.