NEW YORK: Gold prices jumped 2% to a more than two-month high on Thursday as data showed US inflation cooled off a bit in October, lifting hopes that the Federal Reserve would adopt a less aggressive approach on rate hikes.
The US consumer price index (CPI) rose 0.4% last month after climbing by the same margin in September, the Labor Department said. Economists polled by Reuters had forecast an advance of 0.6%.
Spot gold rose 2% to $1,740.28 per ounce by 09:25 a.m. EDT (1425 GMT).
US gold futures climbed 1.8% to $1,744.30.
“When we start to see inflationary data showing that inflation is coming down, there is an expectation that the Fed is going to begin to slow the pace of those interest rate hikes,” said David Meger, director of metals trading at High Ridge Futures.
“Hence you could argue that the dramatic pressure that has been applied to the gold market over the last several months has been released and gold now has the ability to move higher.” Following the US data, the dollar dropped more than 1% to a near two-month low, making gold less expensive for other currency holders. Benchmark US 10-year Treasury yields slipped to a one-month low.
Fed fund futures are now pricing in a 71.5% chance of a 50-basis-point hike at the Fed’s policy meeting in December. The Fed’s policy rate is currently in a range of 3.75%-4.00%.
Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.
“The cool inflation print should mean the beginning of the end for inflation fears, and the Fed will feel much more comfortable ramping down,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
Elsewhere, silver rose 3.2% to $21.69 per ounce. Platinum jumped 4% to $1,025.20, its highest since June. Palladium was up 2.1% at $1,903.75.
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