Gold Price Ends Higher After Soft Inflation Data
New York (Aug 19) Gold futures rebounded to end sharply higher on Wednesday, with investors seeking the safe haven appeal of the precious metal as the equity markets in the U.S. and Europe declining, after some soft U.S. inflation data. Traders also await the minutes from the two-day Federal Open Market Committee's July meet later today.
Gold prices edged higher with the dollar trending lower and after an uptick in U.S. inflation, but below expectations. The marginal uptick compares with the strong gains in the previous two months of May and June, and unlikely to influence the Federal Reserve to raise interest rates next month.
The minutes of the July FOMC meeting are on tap this afternoon.
In economic news, consumer prices in the U.S. saw a modest increase in July, although the pace of growth was short of estimates. The increase was partly due to a hike in food prices with all six major grocery store food group indexes rising.
Meanwhile, there was more good news for Athens after German lawmakers approved a third bailout of EUR 86 billion for Greece on Wednesday, which is likely to be finalized by Eurozone finance ministers later in the day, just in time to release funds to the latter to honor a payment to the European Central Bank due on August 20.
Gold for December delivery, the most actively traded contract, jumped $11.00 or 1.0 percent, to settle at $1,127.90 an ounce, on the Comex division of the New York Mercantile Exchange on Wednesday.
Gold for December delivery scaled an intraday high of $1,129.60 and a low of $1,115.50 an ounce.
On Tuesday, gold prices for December delivery dropped $1.50 or 0.1 percent, to settle at $1,116.90 an ounce, ahead of the minutes from the two-day Federal Open Market Committee's July meet scheduled for Wednesday, even as the dollar trended higher against a basket of major currencies.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 671.87 tons on Wednesday from its previous close.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 96.64 on Wednesday, down from its previous close of 97.00 in late North American trade on Tuesday. The dollar scaled a high of 97.08 intraday and a low of 96.67.
The euro trended higher against the dollar at $1.1112 on Wednesday, as compared to its previous close of $1.1025 in North American trade late Tuesday. The euro scaled a high of $1.1112 intraday and a low of $1.1020.
On the economic front, consumer prices in the U.S. saw a modest increase in the month of July, according to a report released by the Labor Department on Wednesday, with the pace of growth coming in below analyst estimates. The Labor Department said its consumer price index edged up by 0.1 percent in July after climbing by 0.3 percent in June and 0.4 percent in May. Economists had expected prices to rise by 0.2 percent.
The euro area current account surplus increased for the first time in five months, the European Central Bank reported Wednesday. The current account surplus rose to a 3-month high of EUR 25.4 billion in June from EUR 19.1 billion in May. This was the first increase since February.
Eurozone construction output decreased in June after rising in the previous month, figures from Eurostat showed Wednesday. Construction output fell a seasonally adjusted 1.9 percent month-over-month in June, in contrast to a 0.2 percent increase in May, which was revised down from the 0.3 percent hike reported earlier.
The U.K. household finance index declined to the lowest level in eight months in August, as households expect a hike in interest rates over the next 12 months, survey data from Markit Economics showed Wednesday.
The seasonally adjusted household finance index, which measures overall perceptions of financial well being and aims to track consumer behavior, dropped to 43.4 in August from 45.1 in July.
A score below 50 suggests pessimism regarding finances among the U.K. households. The latest reading was the lowest so far this year, but still above the average since the survey began around six-and-a-half years ago.
Fitch Ratings upgraded Greece's sovereign ratings by one notch to 'CCC' while indicating that the agreement between Greece and the European institutions last week on the framework for a third bailout has reduced the risk of Greece defaulting.