Gold futures climbed by more than 1% on Wednesday to their highest settlement since mid-June after monthly U.S. consumer-price index data showed another slowdown in inflation, raising the likelihood that the Federal Reserve may soon call an end to interest-rate hikes.
Price action
-
Gold futures for August delivery
GC00,
+0.14% GCQ23,
+0.14%
gained $24.60, or 1.3%, to settle at $1,961.70 per ounce on Comex. The settlement was the highest for a most-active contract since June 16, according to Dow Jones Market Data. -
Silver futures for September delivery
SI00,
+0.55% SIU23,
+0.55%
gained $1.03, or 4.4%, to $24.31 per ounce. -
Palladium futures for September
PAU23,
-0.91%
climbed by $31.90, or 2.6%, to $1,279.80 per ounce, while platinum futures for October
PLV23,
-0.25%
gained $24.20, or 2.6%, to $956.60 per ounce. -
Copper futures for September
HGU23,
+0.08%
gained 9 cents, or 2.3%, to $3.85 per pound.
Market drivers
Prices of gold gained Wednesday after the U.S. June consumer-price index rose by a modest 0.2%, with the rate of inflation slowing to the lowest since 2021. The increase was smaller than the 0.3% forecast of economists polled by The Wall Street Journal.
The yearly rate of inflation decelerated to 3% from 4% in the prior month. The last time inflation was this low was in March 2021.
The CPI release came in lower than expected while the core CPI release continued to disappoint, said Jeff Klearman, portfolio manager at GraniteShares, who runs the GraniteShares Gold Trust
BAR,
“Gold prices, nonetheless, reacted positively…reflecting market sentiment that the Fed, though likely to maintain its plans for two more rate hikes, was nearing the end of its tightening cycle,” he told MarketWatch.
Read: This is how gold may perform under a soft or hard economic landing
Though certain aspects of inflation remain relatively high, such as wage, rent and other services inflation, the overall trend has been lower, said Klearman.
Concerns focusing on the lagged effects of the Fed’s 10-consecutive rate increases, prior to the pause last month, especially with regards to the banking and real-estate sectors but also with respect to debt-laden companies, “seems likely to push the Fed to act less aggressively going forward,” he said. “This, in turn, should provide impetus for lower rates…and a weaker U.S. dollar — both positive, supportive factors for the price of gold.”
In Wednesday dealings, the ICE U.S. Dollar index
DXY,
was down 1.1% to 100.58.
Gold prices have become bullish following the CPI data, “as traders don’t expect the Fed to chop more wood for now,” said Naeem Aslam, chief investment officer at Zaye Capital Markets. “We think this is the best news for the markets so far this year.”
Also see: China restricts access to 2 metals crucial to making semiconductors. What you need to know.
After gold futures settled for the session, the Fed’s beige book showed that U.S. economic activity increased slightly since late May. Gold futures moved up a bit more in electronic trading shortly after the news to stand at $1,962.70.
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