Gold supported by dovish Fed expectations after soft US CPI data

GOLD prices held firm on Wednesday (Nov 15) following a sharp rise in the last session, as data showing slowing inflation in the US bolstered the view that the Federal Reserve might be done with raising interest rates.

Spot gold held its ground at US$1,962.97 per ounce, as at 0113 GMT after rising 0.9 per cent overnight. US gold futures were steady at US$1,966.80.

Data showed US consumer prices were unchanged in October as Americans paid less for petrol, and the annual rise in underlying inflation was the smallest in two years.

On a year-on-year basis, the consumer price index (CPI) increased 3.2 per cent after rising 3.7 per cent in September. Economists polled by Reuters had forecast the CPI gaining 0.1 per cent on the month and increasing 3.3 per cent on a year-on-year.

Softer-than-expected inflation print sent the US dollar index to a more than two-month low, making gold less expensive for other currency holders. Benchmark US 10-year Treasury yields slid to a near two-month low.

US rate futures on Tuesday priced in a 65 per cent chance of a rate cut in May next year, compared with 34 per cent late on Monday, according to the CME’s FedWatch tool.

Lower US interest rates put pressure on the US dollar and bond yields, increasing the appeal of non-yielding bullion.

Fed officials, including chair Jerome Powell, last week said they were still not sure if rates were high enough to finish the battle with inflation.

Investors focus now shifts to US retail sales data and producer price index (PPI) on Wednesday for more cues on Fed’s interest rate outlook. Economists are forecasting a 0.1 per cent gain in PPI last month, compared with a 0.5 per cent increase in September.

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Gold flat as investors gear up for US inflation report

Spot silver rose 0.2 per cent to US$23.12 per ounce, while platinum eased 0.1 per cent to US$884.49. Palladium was flat at US$1,016.40 per ounce. REUTERS