NEW YORK: Gold gained more than 2percent on Tuesday after softer-than-expected inflation data boosted hopes of the US Federal Reserve adopting a less hawkish stance.
Spot gold rose 2.1percent to USD4,083.99 per ounce by 8:49 a.m. EDT (1249 GMT), after falling to its lowest level since July 1 earlier in the session.
US gold futures gained 2.2percent to USD4,091.80. The US dollar fell 0.6percent, making greenback priced-bullion more affordable for other currency holders. “Gold gallops higher on a surprisingly subdued CPI report that saw headline dive lower but more importantly, core unchanged versus 0.2percent. This should drop rate hike expectations sharply at least for the July and September meetings,” said Tai Wong, an independent metals trader.
US consumer inflation slowed more than expected in June. The Consumer Price Index increased by 3.5percent in the 12 months through June after surging 4.2percent in May, while core CPI inflation was unchanged over the month, after gaining 0.2percent in May. After the data, traders exited bets that the Fed would hike rates at its July 28-29 meeting.
Focus is also on remarks from Fed Chair Kevin Warsh, who is scheduled to deliver the central bank’s semi-annual monetary policy report to Congress at 10 a.m. ET. Investors will also be watching the US Producer Price Index (PPI) data, due on Wednesday. On the geopolitical front, Iran fired ballistic missiles at a US air base in Jordan and the United States attacked Iranian targets for five hours in a battle for control of the Strait of Hormuz that has pushed up oil prices to four-week highs.
“The resumption of serious hostilities with Iran will have headline inflation already higher this month, so gold’s rally will be tempered to USD4,200 over the next few sessions and perhaps USD63-USD64 in silver isn’t out of the question,” Wong said.
Higher inflation could prompt central banks to keep interest rates elevated for longer, weighing on non-yielding assets such as gold. Among other metals, spot silver rose 2.2percent to USD58.89 per ounce, platinum added 1.4percent to USD1,629.92 and palladium climbed 2.4percent to USD1,275.73.
Comments