Gold Settles Higher As Dollar Turns Weak After Inflation Data

Gold futures settled notably higher as the dollar turned weak against other major currencies after data showed an unexpected slowdown in the annual rate of consumer price growth last month.

The dollar index dropped to 102.75 around mid morning, and despite recovering to 102.90, remains weak, losing about 0.4% from the previous close.

Gold futures for August ended higher by $11.50 or about 0.6% at $1,929.40 an ounce. Gold futures shed nearly 3% in June.

Silver futures for September ended up $0.222 at $23.020 an ounce, while Copper futures for September settled at $3.7595 per pound, gaining $0.0605.

Data from the Commerce Department showed the annual rate of consumer price growth slowed to 3.8% in May from 4.3% in April. The slowdown surprised economists, who had expected growth to accelerate to 4.6%.

The annual rate of growth by core consumer prices, which exclude food and energy prices, also slowed to 4.6% in May from 4.7% in April. Economists had expected the pace of growth to be unchanged.

The readings on consumer price inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

While economists generally still expect the Fed to raise interest rates by another quarter point next week, the data has added to optimism the central bank will not follow through with additional rate hikes.

“This was another bad week for gold as risk appetite remained healthy as the big-tech trade won’t go away. Gold had its hands full with both a record first half for the Nasdaq and aggressive central bank tightening globally,” says Edward Moya, Senior Market Analyst at OANDA.

It appears that gold might be able to hold onto the $1900 level if those odds for a second Fed rate hike by year end continue to come down. Gold’s tentative rebound might face resistance from the $1900 level,” Moya adds.

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