US Inflation Rebounds, Gold Struggles to Recover
Gold held around US$4,700 per ounce in Asian trading, after falling 0.6% on Wednesday. This subdued movement reflects a return to market caution following signs of a resurgence in US inflation, which reinforced expectations of extended high interest rates.
The main pressure came from US producer inflation, which rose in April to the fastest pace since 2022. The data pushed up US government bond yields, with the 10-year Treasury yield moving to its highest level since July—conditions that are usually unfavorable for gold as the precious metal does not pay interest.
On the consumer inflation front, the US CPI rose 3.8% annually, the highest pace since 2023, reinforcing the belief that inflation risks remain pervasive. The inflation narrative was also reinforced by rising energy costs, with gasoline prices said to have risen by about 50% since the war began, while recent reports showed increases in components such as airfare, housing, clothing, and food.
Policy factors also came into focus after the US Senate confirmed Kevin Warsh as Federal Reserve chairman by a narrow margin. This confirmation resurfaced market questions about central bank independence, an issue that had been a driving force behind gold's record-breaking rally in January when concerns about political interference were perceived to be mounting.
Broadly speaking, gold has been moving within a tight range since its sharp decline at the start of the Iran war. Investors tend to alternately weigh two risks: inflation, which could potentially keep interest rates high, and the risk of slowing growth, which could ultimately trigger policy easing if the conflict prolongs.
While gold held steady, silver continued to strengthen, rising around 19% throughout May, driven by technical factors and speculation, according to market analysts. Rising copper and supply concerns are said to have supported silver, as silver is a byproduct of copper mining, while trend signals in silver, zinc, and copper are considered to remain strong. The market is now awaiting the direction of yields, subsequent inflation developments, and policy signals from the Fed under new leadership—amidst still-sensitive energy and geopolitical dynamics. (asd)*
Source: Newsmaker.id
