Gold Rises as Dollar Gains Pause Following U.S. Inflation Data, Reports Reuters

By Ashitha Shivaprasad

Gold prices resumed their upward trajectory on Wednesday following a brief dip in response to U.S. inflation data, as the dollar weakened and investors reacted to a modest decrease in consumer prices. By 2:05 p.m. EDT, gold was up 0.8% at $1,852.65 per ounce, with U.S. gold futures rising 0.7% to $1,853.70.

Consumer price growth in the U.S. slowed in April, driven by easing gasoline prices from record highs. This suggests that inflation may have peaked, though it is expected to remain elevated for some time, prompting the Federal Reserve to continue raising interest rates to manage demand.

The dollar initially strengthened following the inflation report but fell by 0.1%, aiding gold’s recovery. Tai Wong, an independent metals trader based in New York, noted, “The market reacted strongly at first, but gold has rebounded with the understanding that while the data was higher than expected, it wasn’t alarming.” He added that the Federal Reserve is unlikely to adopt a more hawkish stance following this report, but there will be no easing either.

U.S. central bank officials reinforced their arguments for a series of swift rate hikes, marking the most aggressive approach since at least the 1990s to tackle inflation. Phillip Streible, chief market strategist at Blue Line Futures in Chicago, stated, “Overall, gold hasn’t been a bad investment. It has maintained a relatively tight range, and I’d prefer holding gold over tech stocks.”

While gold is typically viewed as a hedge against inflation, rising U.S. interest rates increase the opportunity cost of holding the metal and tend to strengthen the dollar, the currency in which gold is denominated.

Suki Cooper, an analyst, expressed expectations that gold prices will begin to reflect real yields as the year progresses, anticipating some downward pressure in the latter half of the year while remaining relatively high compared to historical standards.

In other precious metals, spot silver rose 1.6% to $21.58 per ounce, platinum climbed 3.7% to $999.33, and palladium experienced a 1% decline, settling at $2,044.17.