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Gold Prices Wobble as Wholesale Inflation Ticks Higher

Investing.com – Gold prices moved higher Friday, easily shaking off a stronger-than-expected reading for producer price inflation in June.

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Gold futures for August delivery on the Comex division of the New York Mercantile Exchange, hit an intraday low of $1,404.85 immediately following the data, but recovered after the knee-jerk reaction and were last up $2.65 to $1,409.35 a troy ounce by 9:17 AM ET (13:17 GMT). They’re still a little more than 1% off the highs they hit earlier in the week on the back of Federal Reserve Chairman Jerome Powell’s Congressional testimony, however.

Headline inflation at factory gates rose 1.7% from a year earlier in June, topping expectations for a larger drop to 1.6%, while the core annualized reading that removes volatile food and energy components unexpectedly held steady at 2.3%.

The readings follow a similar picture painted Thursday by core consumer prices that also unexpectedly ticked higher in June.

Although these stronger-than-expected inflation readings are not likely to be considered a game changer for the Fed, they do call into question Powell’s concerns that weak inflation could be more persistent than originally expected.

In testimony to Congress delivered this week, Powell all but confirmed market expectations that the Fed will cut interest rates by a quarter-point at its July 30-31 meeting.

Gold prices, which benefit from decreasing interest rates that lower the opportunity cost of holding non-yielding bullion – have seen a bumpy ride this week as Powell’s apparent commitment to policy easing sent the precious metal soaring 1.9%, only to see the consumer inflation data send prices down 1.3%.

Gold is still on track for weekly gains of 0.4%.

In other metals trading, silver futures was little changed at $15.148 a troy ounce by 9:23 AM ET (13:23 GMT).).

Palladium futures lost 0.3% to $1,554.25 an ounce, while sister metal platinum fell 1.0% to $822.25.

In base metals, copper traded down 0.3% to $2.679 a pound.

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