Gold eases after surprise US CPI jump, holds above $1400

Andrew Cummings
July 12, 2019

Spot gold was up 0.3% at $1,407.69 per ounce.

"We are expecting the gold price to climb further and perhaps even touch Rs 30,000 per sovereign by Deepavali", said Balu.

Also helping gold was the dollar index, which eased for a third straight session as stronger-than-expected USA inflation data failed to shake convictions that the Federal Reserve will start cutting interest rates this month.

Spot gold was up 0.2% at $1,406.80 per ounce as of 1014 GMT.

The Federal Reserve last month downgraded its US inflation projection for 2019 to 1.5% from the 1.8% projected in March.

"Once we get a quarter-point rate cut, which markets are widely expecting, Powell will keep all options open on the table, and that means the dollar's outlook is uncertain", said Manuel Oliveri, an FX strategist at Credit Agricole in London.

"We saw today's inflation data - the markets started to back off today because it challenges the need for additional rate cuts", said Chris Gaffney, president of world markets at TIAA Bank, calling bullion's decline a kneejerk reaction.

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In testimony to Congress, Mr Powell pointed to "broad" global weakness that was clouding the United States economic outlook amid uncertainty about the fallout from the trade conflict with China and other nations.

This statement weighed on the USA dollar.

U.S. -China trade relations is a wildcard today.

Spot gold shed one per cent to $US1,404.40 per ounce, dropping almost $US15 after U.S. consumer prices demonstrated a pick-up in underlying inflation, increasing in June by the most in almost one and a half years.

Policymakers from the US central bank are scheduled to meet on July 30-31, where investors will look for further cues on monetary policy easing. Gold holdings with SPDR Gold Trust rose 6.46 tn to 800.54 tn on Wednesday, according to data on the website of the world's largest gold exchange-traded fund.

At 1830 IST, the August gold contract on MCX was 0.4% higher at 34,980 rupees per 10 gm and the same-month contract on COMEX was up 0.7% at $1,422.20 an ounce.

Silver was down 0.9 per cent to $US15.10 while spot platinum dipped 0.8 per cent to $US818.

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