Gold gains as dollar weakens and inflation data eases
Gold rose on Thursday as the U.S. dollar weakened and inflation eased in line with expectations, with traders dialing back bets on interest rate hikes a day after Federal Reserve Chairman Kevin Warsh offered little clarity on the outlook for inflation and monetary policy.
Spot gold XAU= was up 1.1% to $4,109.94 per ounce by 10:03 a.m. EDT (1403 GMT). U.S. gold futures GCcv1 for August delivery gained 1.9% to $4,108.30.
The dollar fell 0.9% as the yen strengthened, while traders remained on alert for possible intervention by Japanese authorities to prop up the battered currency. A weaker dollar makes greenback-priced bullion more affordable for buyers overseas.
Inflation, rates and geopolitical tensions support bullion
Prices were little changed after a Commerce Department report showed the Personal Consumption Expenditures Price Index fell 0.1% in June, in line with economists' expectations in a Reuters poll. The easing is likely to be temporary as renewed hostilities in the Middle East raise oil prices.
The PCE data looks "a little bit better than the market expected. So for now the environment on the inflation side is more or less stable. However, the oil market is going to continue to be a problem," said Bart Melek, global head of commodity strategy at TD Securities.
"Inflation is maybe a little contained right now, but that might very easily change if we continue to see instability in the Middle East," Melek added.
The Fed on Wednesday left its benchmark interest rate in the 3.50%-3.75% range. In a press conference after the release of the policy statement, Warsh pledged an unwavering commitment to bring inflation down, a message that left markets confused about just what he was prepared to do. Spot gold prices rose about 2% after the policy decision.
Traders now see a 57% chance of a U.S. rate hike at the Fed's September 15-16 meeting, down from about 77% before the Fed meeting, according to CME Group's FedWatch Tool. Higher-for-longer rates tend to diminish bullion's appeal due to the metal's non-yielding characteristic.
U.S. jobless claims increased less than expected last week, suggesting labor market conditions remained stable, another government report showed.
Oil prices edged down as investors weighed talks between Oman and Iran over the Strait of Hormuz and escalating tensions between the U.S. and Iran.
Among other metals, spot silver XAG= rose 1.5% to $58.52 per ounce, platinum XPT= gained 1.9% to $1,641.78, and palladium XPD= climbed 3.8% to $1,294.50.
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