Gold prices edged higher on Wednesday, buoyed by weaker-than-expected US inflation data, which bolstered investor expectations that the Federal Reserve could begin cutting interest rates as early as September.
As of 13:55 ET (1755 GMT), spot gold was up 0.1%, trading at $3,324.72 per ounce, after having earlier surged by as much as 1% during the session. US gold futures settled largely unchanged at $3,343.7.
The US Consumer Price Index (CPI) for May showed a modest increase of 0.1%, following a 0.2% rise in April. Economists had anticipated a 0.2% increase, with the year-on-year CPI climbing 2.5%. The lower-than-expected CPI data provided a boost to gold, as investors interpreted it as a signal that the Federal Reserve may take a more dovish stance on interest rates.
“The surprise drop in core CPI has propelled the entire precious metals complex higher, as yields and the US dollar decline. The hope is that this will prompt the Fed to cut rates sooner rather than later,” said Tai Wong, an independent metals trader.
According to the CME FedWatch tool, traders are currently pricing in a 68% likelihood of an interest rate cut by the US central bank in September.
Market Focus Shifts to US PPI Data and Fed Meeting
Attention is now shifting to Thursday’s release of the US Producer Price Index (PPI) data, ahead of the Federal Reserve’s June 17-18 meeting. The market is looking for any further indications that the Fed may opt for a rate cut.
“The market will be watching closely to see if gold and silver break through recent highs, at $3,403 and $36.90, respectively. A strong rally in response to positive data could signal further upside. However, if we don’t see a solid price movement, it could point to a short-term correction,” Wong noted.
Platinum and Other Precious Metals Performance
In other precious metals, platinum saw a notable gain of 2.9%, reaching $1,256.70 per ounce, marking its highest level since 2021 earlier in the day. While speculative demand and strong interest from exchange-traded funds (ETFs) have driven platinum’s recent rally, Goldman Sachs cautioned that a sustained breakout might be challenging due to price-sensitive Chinese demand, potential downside pressure from the auto sector, and an anticipated increase in global supply.
Meanwhile, spot silver fell 1.2%, trading at $36.11 per ounce, while palladium added 1.3%, rising to $1,074.25 per ounce.
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