Gold moves in a positive zone ahead of US inflation data

Economies.com
2024-05-15 09:19AM UTC

Gold prices rose in European trade on Wednesday, extending gains for the second straight day and heading for multi-week highs as both the dollar and US treasury yields lose ground.

 

It comes ahead of important US consumer prices data which will cast light on the future of US interest rates.

 

The data comes following producer prices data released yesterday, which included sharp downward revisions for March, in turn boosting the odds of a Fed rate cut in the summer.

 

Prices 

 

Gold prices rose 0.6% today to $2372 an ounce, with a session-low at $2355. 

 

The precious metal rose 0.95% yesterday, resuming gains and moving away from two-week highs at $2378. 

 

The Dollar

 

The dollar index fell 0.25% on Wednesday, extending losses for the third straight session and plumbing two-week lows at 104.81 against major rivals.

 

A weaker dollar makes gold-denominated futures cheaper to holders of other currencies.

 

US Yields

 

US 10-year treasury yields fell by 0.5% today to a five-week low at 4.418%, underpinning non-yielding assets, following US producer prices data. 

 

US Producer Prices

 

US producer prices rose 0.5% m/m in April, passing estimates of 0.3%, however, March’s reading was revised to show a contraction of 0.1% instead of a 0.2% increase. 

 

Core producer prices rose 0.5% m/m in April, above estimates of 0.2%, with the March reading revised to show a 0.1% decline.

 

On a yearly basis, US producer prices rose 2.2% in April, with the March reading reduced to show a 1.8% increase. 

 

US Rates 

 

Following the data, the odds of a Fed interest rate cut in July rose to 30%, and the odds of such a cut in September rose to 70%.

 

According to the Fedwatch tool, investors are expecting two interest rate cuts overall by the Federal Reserve this year. 

 

US Producer Prices

 

Now investors await US producer prices data later today, expected to clock in at 3.4% for April, down from 3.5% in March. 

 

The SPDR

 

Gold holdings at the SPDR Gold Trust remained flat yesterday at a total of 831.93 tonnes, the lowest in a week. 

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