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Markets

Gold slips as dollar strengthens on 'transitory' inflation view

  • Gold slips below $1,900/oz mark.
  • US CPI rose 0.6% in May.
  • Semiconductor shortage impact on PGMs limited- analyst.
11 Jun 2021

Gold prices slipped on Friday hurt by a resilient dollar as some investors bet that recent spikes in US consumer prices are temporary.

Spot gold had fallen 0.9% to $1,881.80 per ounce by 10:07 a.m EDT (1407 GMT). US gold futures were down 0.7% at $1,883.30.

The dollar index rose 0.4%, reducing gold's appeal to investors holding other currencies.

TD Securities commodity strategist Daniel Ghali noted US employment and CPI data had failed to spur gold above $1,900, suggesting inflation hedging flows were slowing at the same time as physical flows were weakening.

"As a result a pullback in gold should unfold," he said.

Gold is seen as a hedge against inflation.

While a near-term pullback to $1,850 could be on the cards, gold prices in the medium term should be supported by dovish central bank policies for a prolonged period of time, Ghali said.

Data on Thursday showed US consumer prices rose sharply in May, but analysts say the spike is likely 'transitory' and therefore fears over the Federal Reserve policy tightening have ebbed.

On the Physical front, gold demand crept up this week in top hubs India and China though dealers were still forced to offer discounts.

"With next week's FOMC unlikely to trigger any increased taper focus, the attention will instead turn to Jackson Hole in late August for any announcement about a change in direction," said Ole Hansen, head of commodity strategy at Saxo Bank in a note, referring to the annual central banking conference.

Palladium rose 0.8% to $2,798.92 and platinum gained 0.1% to $1,151.52.

Automobile companies had likely already anticipated the impact of the global semiconductor shortage and replenished their inventories of autocatalyst metals platinum and palladium, limiting its impact on price, TD Securities' Ghali said.

Platinum and palladium are used as catalysts in vehicles to reduce emissions.

Meanwhile, silver were up 0.6% at $28.14 per ounce.