Gold gains as dollar, Treasury yields weaken after U.S. inflation data

The consumer price index (CPI) rose 0.3% last month, the smallest gain since August, the Labor Department said on Wednesday, versus the 1.2% month-to-month surge in the CPI in March, the largest advance since September 2005.

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New York: Gold gained on Thursday as the dollar and Treasury yields slipped after U.S. consumer price data suggested inflation might have peaked in April, allaying some concerns of more aggressive Fed rate hikes.

A weaker dollar makes gold attractive for overseas buyers, while lower Treasury yields reduce the opportunity cost of holding zero-yield bullion.

Fundamentals Spot gold was up 0.2% at $1,855.11 per ounce, as of 0103 GMT, having risen as much as 1.1% in the previous session. U.S. gold futures rose 0.2% to $1,856.90.

The dollar fell, lifting demand for greenback-priced gold, after economic data showed inflation remained high but was unlikely to lead the U.S. central bank to shift to a more aggressive path of monetary policy.

The consumer price index (CPI) rose 0.3% last month, the smallest gain since August, the Labor Department said on Wednesday, versus the 1.2% month-to-month surge in the CPI in March, the largest advance since September 2005.

Benchmark U.S. 10-year Treasury yields were down after the data failed to ease concerns that the Federal Reserve’s agenda to cool rising prices may induce a recession.

The Fed raised its benchmark overnight interest rate by half a percentage point last week, the biggest hike in 22 years, as it moves to unwind ultra-easy pandemic-era monetary policy and attempts to combat soaring inflation.

Spot silver was up 0.1% to $21.57 per ounce, while platinum dipped 0.2% to $990.64, and palladium fell 0.7% to $2,021.16. Earlier to this, U.S. consumer price growth slowed in April as gasoline prices eased off record highs, suggesting inflation has probably peaked, though it is likely to stay hot for a while and keep the Federal Reserve raising interest rates to cool demand.

Helping gold advance, the dollar index, which initially strengthened on the CPI data, edged back down about 0.3%.

“The market saw the print and went ‘SELL, SELL, SELL.’ But gold has since bounced back with the thinking that the data is higher than expected, but not horrifying,” said Tai Wong, an independent metals trader in New York.

“The Fed won’t get more hawkish with this report, but definitely won’t ease off either.” U.S. central bank officials on Tuesday fortified their arguments for the swiftest series of rate hikes since at least the 1990s to combat inflation.

“Overall, gold hasn’t been a bad investment. It’s been holding a fairly tight range, I’d much rather own gold than Nasdaq, or Bitcoin,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Although gold is considered a safe haven from inflation, rising U.S. interest rates increase the opportunity cost of holding bullion, while boosting the dollar, the currency in which gold is priced.

“We expect (gold) prices to revert to taking cue from real yields as the year unfolds, encountering downside pressure in H2 but remaining elevated relative to historical levels,” said Suki Cooper, an analyst at Standard Chartered.

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