US gold futures advanced early on Wednesday, after several US economic reports strengthened the view that the Federal Reserve would hold interest rates steady in September and pushed the dollar lower, traders said.
"The CPI came in as expected, and some people thought there could have been an upside surprise. So the dollar fell, and it helped strengthen the foreign exchange. Gold and silver both doing better off of the weaker dollar," said James Quinn, commodity commentator at AG Edwards.
December delivery gold rallied $8.60 an ounce to $641.50, after setting a session high at $642.50, on the New York Mercantile Exchange's COMEX division. The low was $632.10.
COMEX estimated 10 am volume at 13,000 lots. The dollar slid after a benign reading of underlying US consumer inflation strengthened the view that the Federal Reserve may not need to increase interest rates at its September meeting in order to contain price pressures. A smaller-than-forecast 0.2 percent rise in the July core US consumer price index, which excludes food and energy prices at the retail level, sent the dollar to session lows.
"This all suggests that the Fed may not be raising interest rates again, while comments abroad suggest that other central banks will hike rates further," said David Durrant, chief strategist at Julius Baer Investment Management in New York.
With technical factors directing much of the recent gold trade, some traders noted that support levels held in Tuesday's downdraft and considered that a bullish sign as well. Spot gold advanced to $628.0/8.80 an ounce from $623.60/624.40 an ounce late in New York on Tuesday.
Wednesday's bullion fix in London was $629.75. Silver also charged higher on the dollar's decline. COMEX September silver raced up 30.5 cents to $12.39 an ounce, and traded up to $12.43 from a low at $12.07. Spot silver firmed to $12.33/12.43 an ounce from $12.01/2.11 late in New York on Tuesday.
Silver was fixed at $12.15 an ounce. NYMEX October platinum was up $10.60 at $1,252 an ounce. Spot platinum increased to $1,236/1,242. September palladium gained $9.30 to $334 an ounce. Spot palladium was higher at $333/338.