Producer Price Inflation Weakens, Gold Rebounds
Gold prices rebounded on Wednesday (July 15th) after weakening earlier in the session. XAU/USD traded around US$4,064 per troy ounce, up 0.30% daily, after previously dropping to US$4,017 intraday.
Gold's gains came after the US Producer Price Index (PPI) data came in lower than expected. The headline PPI fell 0.3% month-on-month in June, weaker than the projected 0% drop, after previously rising 0.6% in May.
Annually, US producer price inflation slowed to 5.5% from 6.0%, also lower than the 6.2% forecast. Meanwhile, the core PPI rose 0.2% month-on-month, below expectations of 0.4%, although it edged up slightly to 4.7% year-on-year.
This data continued signals of more benign inflation after the US CPI also came in lower than expected on Tuesday. The combination of weakening CPI and PPI has also lowered expectations of an imminent Fed rate hike, thus boosting gold as a non-yielding asset.
However, gold's upside remains limited as inflation risks have not completely dissipated. Oil prices have risen again due to the escalating conflict in the Middle East, particularly after President Donald Trump threatened to escalate attacks on Iran if Tehran does not return to the negotiating table.
On the Fed side, central bank officials have maintained a firm tone. John Williams believes inflation must be returned to its 2% target on a sustainable basis, while Kevin Warsh emphasized that the Fed has no tolerance for persistently high inflation. As a result, gold has received support from the cooler inflation data, but remains vulnerable if oil prices continue to rise and the Fed reopens the door to interest rate hikes. (arl)
Source: Newsmaker.id
