NEW YORK: Gold prices extended gains after a softer-than-expected US inflation reading hurt the dollar and raised hopes that the Federal Reserve might not raise interest rates again as soon as October. Spot gold was up 0.7percent at USD4,209.71 per ounce as of 9:05 a.m. ET (1305 GMT). However, prices were down 5.4percent in September so far.
US gold futures gained 1.5percent to USD4,241.90. The Personal Consumption Expenditures Price Index rose 0.3percent last month after a downwardly revised 0.1percent gain in July, the Commerce Department’s Bureau Economic Analysis said on Wednesday. In the 12 months through August, PCE inflation advanced 2.6percent after increasing by a downwardly revised 3.4percent in July. Core PCE increased 3.0percent year-on-year in August after a downwardly revised 3.0percent advance in July.
The dollar extended losses after the data, offering some support to bullion by making it cheaper for overseas buyers. “Core PCE a tenth below consensus, and a lower revision of last month’s figure, have boosted gold and may have put a short-term bottom at 4100, which was Monday’s low,” said independent metals trader Tai Wong.
“The Fed is explicitly focused on inflation right now, and this should further reduce the likelihood of an October rate hike.”
The US central bank tracks the PCE price measures for its 2percent inflation target.
The Fed this month raised interest rate to the 3.75percent-4.00percent range, and flagged further increases in the months ahead.
While gold is traditionally considered an inflation hedge, it loses its appeal to yield-bearing assets in a high-interest-rate environment.
New York Fed President John Williams said that policy makers probably only need to deliver one more hike this year to get inflation back on track.
He also said that he saw “no urgency” for further action. Financial markets now only see an about 37percent chance of a rate hike in October, down from about 45percent before the PCE data, CME’s FedWatch Tool showed.
Spot silver fell 0.5percent to USD61.15, platinum rose 0.4percent to USD1,711.77, and palladium eased 0.1percent to USD1,221.36. All three metals were poised for monthly declines.