NEW YORK: Gold prices trimmed losses on Wednesday after US producer prices unexpectedly fell in June, although worries about inflation and elevated interest rates remained due to escalating tensions in the Middle East.
Spot gold was down 0.2 percent at USD4,047.27 per ounce by 11:35 a.m. EDT (1535 GMT) after falling nearly 1 percent earlier in the session. U.S gold futures fell 0.4 percent to USD4,053.70.
“Gold has pared losses from earlier this morning as PPI came in lower than expected and eased some of those concerns about the Fed having multiple interest rate hikes this year,” said Phillip Streible, chief market strategist at Blue Line Futures.
The Producer Price Index for final demand dropped 0.3 percent last month after a downwardly revised 0.6 percent increase in May, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast an unchanged PPI after a previously reported 1.1 percent advance in May.
Traders see about a 10.2 percent chance of a rate increase at the Federal Reserve’s July meeting, versus 16.6 percent before the data, CME FedWatch Tool’s data showed. US consumer inflation also slowed more than expected in June, data on Tuesday showed.
Meanwhile, the US said it has begun a new wave of strikes against Iran after re-imposing a naval blockade of Iranian ports, while Iran threatened to shut off more regional energy exports. Oil extended gains on Wednesday.
“Recent developments revolving around the Strait of Hormuz have simply revived fears around untamed prices pressures. Should tensions escalate further, resulting in higher oil prices, this could expose gold to downside risks,” said Lukman Otunuga, senior research analyst at FXTM.
“A solid breakdown below this point may open the doors toward USD3,950 and USD3,000. Should USD4,000 prove reliable support, prices may rebound back toward USD4,100.”
Higher fuel costs could keep inflationary pressures persistent, prompting central banks to hold rates at elevated levels for longer and weighing on gold’s appeal as a non-yielding asset.
Spot silver dipped 1.6 percent to USD57.67, while platinum gained 0.2 percent to USD1,634.13. Palladium fell 0.8 percent to USD1,294.25.
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