Gold Shrugs Off CPI After Powell Flags Rate Cut Amid Global Risk
Bloomberg – Gold futures rose for a third day on speculation stronger-than-expected U.S. inflation won’t be enough to convince the Federal Reserve to shut the door on a potential interest rate increase as soon as this month.
Bullion stayed above $1,400 even as consumer prices rose more than forecast in June and jobless claims fell. While Fed Chair Jerome Powell had noted the strength of the labor market, he said Wednesday that the economy faces risks including a global slowdown in manufacturing. That fueled bets policy makers will cut rates, boosting the appeal of non-interest bearing gold.
The CPI data was “probably not enough to change the mindset of the Fed given how long inflation has been quiescent,” Tai Wong, head of base and precious metals derivatives trading at BMO Capital Markets, said an email. “Gold is clawing back CPI-sparked losses as market grabs a short-term bargain.”
Gold futures for August delivery rose 0.2% to $1,415.80 an ounce at 9:53 a.m. on the Comex in New York, after rising as much as 1.2% earlier.
Prices pared gains after the Labor Department released data showing the consumer price index, which excludes food and energy, rose 0.3% from the prior month, the most since January 2018, and 2.1% from a year earlier.
“It will take more than one stronger print in inflation to even register for Fed policy makers,” Wong said.
Exchange-traded funds backed by the precious metal have been rising, with holdings reaching 2,311.3 tons as of Wednesday, the most since 2013.
“Although there will be a few bumps on the way given the level of skepticism in the first gold rally cycle, we think there will be an even greater rush for gold in the coming weeks and months,” Stephen Innes, managing partner at Vanguard Markets Pte, said in a note. “Gold prices could stay on an upward path as central banks pivot to an easing stance, the U.S. dollar turns gradually weaker with a more dovish Fed and the burden of harmful yielding debt rises.”
The recent gains in gold are likely to be sustained with financial market uncertainty and accommodative monetary policy seen supporting gold investment demand over the next six to 12 months, the World Gold Council said in its mid-year outlook report. The U.S. dollar may remain range-bound as trade tensions and lower rates offset continued economic growth.
In other precious metals, silver futures were little changed on the Comex. Palladium declined on the New York Mercantile Exchange, while platinum was also little changed.