REUTERS/ALEXANDER MANZYUK
Ingots of 99.99 percent pure gold in a workroom during production at Krastsvetmet precious metals plant in the Siberian city of Krasnoyarsk, Russia, on June 16. Gold gained more than 2% today after softer-than-expected inflation data boosted hopes of the U.S. Federal Reserve adopting a less hawkish stance.
Gold gained more than 2% today after softer-than-expected inflation data boosted hopes of the U.S. Federal Reserve adopting a less hawkish stance.
Spot gold was up 1.6% at $4,063.78 per ounce by 1:30 p.m. EDT (7:30 a.m. Hawaii time), after falling to its lowest level since July 1 earlier in the session.
U.S. gold futures settled 1.6% higher at $4,069.70.
The U.S. dollar fell 0.6%, 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 0.2%. This should drop rate hike expectations sharply at least for the July and September meetings,” said Tai Wong, an independent metals trader.
U.S. consumer inflation slowed more than expected in June. The Consumer Price Index advanced 3.5% in the 12 months through June, after surging 4.2% in May, while core CPI inflation was unchanged over the month, after gaining 0.2% in May.
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After the data, traders exited bets that the Fed would hike rates at its July 28-29 meeting.
Investors will also watch the U.S. Producer Price Index (PPI) data, due Wednesday.
In a testimony to the House Financial Services Committee, Fed Chair Kevin Warsh reiterated that his main thrust right now is to bring inflation back to the U.S. central bank’s 2% target.
On the geopolitical front, Iran fired ballistic missiles at a U.S. 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 $4,200 over the next few sessions and perhaps $63-$64 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% to $58.79 per ounce, platinum added 1.6% to $1,629.83, and palladium climbed 4.8% to $1,307.30.