NEW YORK: Gold held onto gains on Wednesday in relatively choppy trading as the dollar retreated after US inflation readings came in mostly as expected, reinforcing bets for a pause in the Federal Reserve’s interest rate hikes.
The US dollar and Treasury yields fell after the Labor Department reported that the consumer price index (CPI) rose 0.4% last month, in line with estimates.
However, underlying inflation remained strong. In the 12 months through April, the core CPI gained 5.5% year-on-year after advancing by 5.6% in March.
Spot gold was up 0.1% to $2,035.69 per ounce by 10:10 a.m. EDT (1410 GMT), paring some gains and even briefly turning negative again after jumping as much as 0.7% soon after the data.
US gold futures were mostly unchanged at $2,042.70.
“Shorter term futures traders took some profits on the surge and that backed the price off, but the marketplace realized that the CPI data is not all that bullish for gold,” said Jim Wyckoff, senior analyst at Kitco Metals.
The data disrupted the modest momentum that had been building for an 11th straight interest rate hike in June, with the bulk of futures tied to the Fed’s rate betting on a pause.
Gold may struggle in the short term with core inflation well above the Fed’s target, “but for now the positive correlation to short-end rate futures will dictate the direction,” said Ole Hansen, head of commodity strategy at Saxo Bank.
While gold is considered a hedge against inflation, rising interest rates dull non-yielding bullion’s appeal.
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