Gold prices fell on Thursday under pressure as Treasury yields surged on a wave of government data showing that US inflation hit a 13-year high in May.
The US consumer price index jumped 0.6% last month, the fourth largest in a row. The inflation rate over the past year has risen to 5% from 4.2% in the previous month. This is the highest level since 2008.
The Federal Reserve “remains of the view that current inflation is temporary due to supply problems caused by COVID and the economic recovery from last year’s lockdowns,” said Jason Teed, Co-Portfolio Manager at Gold Bullion Strategy Fund QGLDX.
MarketWatch reported following the release of CPI data. “So far, the market seems to agree.”
“If inflation continues above expectations, gold may continue to rise in value, but if we see inflation start to improve, the metal could lose some of the gains we have seen so far this year,” he said.
August gold GCQ21,
fell 80 cents, or 0.04%, to $ 1,894.70 an ounce after rising nearly 0.1% on Wednesday.
Gold prices traded mostly lower after inflation data, but managed to cut their losses from the daily low of $ 1,871.80.
The CPI report “falls into the camp of those who think inflation may get too high in the coming months,” Jim Wyckoff, senior analyst at Kitco.com, said in a market review.
“In the short term, gold and silver traders are focusing more on bond yields following the CPI report and less on the bullish implications of rising inflation going forward,” he said.
The decline in the value of bullion occurs as bond yields rise and the dollar rate stabilizes. Estimated yield on 10-year Treasury bonds TMUBMUSD10Y,
hit its lowest level since early March on Wednesday, but traded about 1.50% on Thursday, while the dollar held above 90, according to ICE US Dollar Index DXY.
Gold markets have struggled to hold above the psychologically important price of $ 1,900 an ounce. Lower bond yields and a weaker dollar have periodically boosted the yellow metal, but uncertainty over inflation dynamics have fueled booming trading.
Meanwhile, the European Central Bank, as expected, left base rates unchanged, but said it could adjust its asset purchase program to continue to support financial markets in the eurozone.
Other metals traded on the Comex include the July copper HGN21,
lost 1.1% to $ 4.48 a pound.
July platinum 21 zloty,
fell 0.7% to $ 1143.60 an ounce, and September palladium PAU21,
traded at $ 2,769 an ounce, down 0.1%.