Gold gains 1% as traders brace for key US inflation data

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Gold gains 1% as traders brace for key US inflation data

Gold prices jumped 1% on Monday after hitting a two-week low in the previous session as investors weighed fading bets on a cut in US interest rates ahead of a key report on the inflation expected later in the week.

Spot gold was up about 1% at $2,355.60 an ounce at 10:05 a.m. ET (2:05 p.m. GMT), after touching its lowest level since May 9 at 2,325 on Friday, $19.

Most markets in the United States are closed for the federal Memorial Day holiday.

Bullion hit a record high of $2,449.89 last week, but has lost more than $100 since then.

“Gold suffered from perceived more hawkish comments from Fed officials and better-than-expected US economic data as market participants once again shifted the timing of the Fed’s first rate cut” , said Giovanni Staunovo, analyst at UBS. Federal Reserve officials have indicated that it will likely take longer than expected for inflation to fall to 2%, minutes from its latest policy meeting last week show. Fed Governor Christopher Waller said Friday it’s possible an underlying interest rate that determines the strength of monetary policy could rise in the future after years of declines, but it’s too soon to say if this will happen. While gold is often seen as a hedge against inflation, higher rates increase the opportunity cost of holding the non-yielding asset.

Investors are now awaiting the April figure for the Personal Consumption Expenditures (PCE) Price Index, the US central bank’s preferred inflation gauge, due on Friday.

Traders currently assess a roughly 62% chance that the Fed will cut rates in November, according to the CME FedWatch tool, up from a roughly 63% chance on Friday.

“We expect gold prices to remain volatile and price declines to be slight, aiming for gold prices to test new record highs later this year,” UBS’s Staunovo said.

Spot silver rose 3.6% to $31.42. Last week it reached its highest level in 11 years.

“Silver has outperformed gold this year, and this trend is likely to continue,” Staunovo said.

Platinum rose 2.7% to $1,052.75 and palladium rose 2.9% to $991.11. Both metals were up 3% earlier in the session.

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