Inflation Cools, Gold Soars Above US$4,100
Gold prices surged sharply after lower-than-expected US inflation data came out. The cooler CPI data eased concerns that the Fed would need to raise interest rates soon to curb inflation.
Gold briefly rose as much as 2.5% and returned above US$4,100 per troy ounce. This rise occurred after data showed US consumer prices fell 0.4% in June, reversing from a 0.5% increase in May.
Sentiment for gold was further strengthened by a weakening US dollar. The Bloomberg Dollar Index fell 0.5%, while the two-year US Treasury yield fell 10 basis points. The decline in yields and the dollar made gold more attractive to investors.
The lower inflation data also reduced the likelihood of an imminent Fed rate hike. This was a welcome boost for gold, especially after the price had fallen 2.9% the previous day due to concerns that the US-Iran conflict could push up energy prices and inflation.
According to ING commodity analyst Ewa Manthey, gold welcomed the weaker CPI data. Falling yields and a weakening dollar have again provided support for precious metals, while the market is beginning to see the possibility that the Fed could return to its policy easing path.
As a result, gold has the potential to continue strengthening as long as the dollar and yields remain low. However, investors should still monitor developments in the Middle East conflict and oil prices, as the energy surge could reignite inflation concerns. (arl)
Source: Newsmaker.id
