Spot silver rose more than 3% to $30.15 per ounce, platinum was up 1.9% at $969.55 and palladium gained 2.5% to $906.25.
Gold Prices Increase Amid Hope for Interest Rate Cut
Gold prices rose about 1% on Wednesday after a surprisingly soft U.S. consumer inflation report raised hopes for an interest rate cut in 2024, while investors awaited the release of the Federal Reserve’s latest policy statement and economic projections.
Spot gold climbed 0.92% to $2,337.47 per ounce by 1700 GMT. U.S. gold futures for August delivery were up 1.2% at $2,354.60.
Consumer Price Index Data Impact on Gold
The headline consumer price index was flat on a month-on-month basis in May, below expectations for a 0.1% gain. Core prices rose 0.2%, also below economists’ projections for a 0.3% increase.
This data has put the possibility of two rate cuts back on the table, which is favorable for gold as lower interest rates benefit non-interest bearing assets such as gold. The drop in the dollar due to lower interest rate expectations is also supporting the price of gold.
Market Response to Interest Rate Expectations
The dollar index was down 0.9%, and benchmark U.S. 10-year Treasury yields dropped to their weakest levels since April 1. Traders have adjusted their bets to account for 50 basis points of Fed policy easing, up from 40 bps before the CPI data. Expectations for a rate cut at the Fed’s September meeting have risen to about 70% from around 54% prior to the data.
There is still an inverse correlation between rates and gold, and the current risk-on sentiment with treasury yields decreasing is beneficial for gold.
Upcoming Federal Reserve Release
Attention is now focused on the U.S. central bank’s release at 2 p.m. EDT of its policy statement and updated quarterly economic projections. Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. EDT.
Additionally, spot silver rose more than 3% to $30.15 per ounce, platinum was up 1.9% at $969.55 and palladium gained 2.5% to $906.25.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Jun 12 2024 | 11:29 PM IST
Insight: It is crucial for investors to monitor economic indicators like inflation rates and interest rate projections as they directly impact the price of gold in the market. The Federal Reserve’s policy decisions play a significant role in shaping investor sentiment, which in turn affects the demand for precious metals like gold, silver, platinum, and palladium.
