Gold price tries to snap losing streak as inflation data in focus

May 10, 2018

London (May 10)  Gold futures crawled higher Thursday, attempting to halt their latest retreat at three straight sessions, ahead of a release on consumer inflation that could set the near-term course for the dollar and precious metals.

June gold GCM8, +0.37% gained $3, or 0.2%, to $1,316 an ounce. Even with its three consecutive sessions of declines, gold has been confined in a tight range and remains well off the two-month low of $1,305.60 hit just a week ago.

“We maintain cautiousness amid a strong dollar and higher rates, but would ultimately view weakness as an opportunity to slowly build exposure in gold,” said Joni Teves, analyst at UBS, in a note.

Focus for now is on consumer price inflation data for April, due at 8:30 a.m. Eastern Time. Economists polled by MarketWatch expect a reading of 0.3%, up from negative 0.1% in March.

Inflation is one of the key factors the Fed looks at when deciding their aggressiveness with interest-rates hikes and a small, but vocal, chorus of hawks at the central bank could find just what they’re looking for in Thursday’s report. Inflation readings hit just after U.S. crude-oil prices CLM8, +0.58% reached their highest levels since 2014 amid rising Middle East tensions  this week on the back of President Donald Trump’s decision to withdraw the U.S. from a multilateral nuclear pact with Iran, raising fears that inflation may be rearing up.

Inflation can be a mixed bag for gold. As a driver of higher interest rates, it can drag on the nonyielding metal as investors look for alternative assets. At the same time, gold’s traditional role as an inflation hedge can kick in for some investors.

Rounding out the economic docket, weekly jobless claims are due out at 8:30 a.m. Eastern, while the federal budget is due at 2 p.m.

Gold had failed to find support from a pause this week in the dollar’s rise to multi-month highs, through Wednesday at least. At last check, the ICE U.S. Dollar Index DXY, -0.22% which measures the buck against six rivals, eased 0.3% to 92.84.

Weakness in the buck can make dollar-priced gold more attractive to investors using other currencies. The buck had been driven up amid an expected widening gap between higher U.S. interest rates and comparative rates for the other economic powerhouses. In fact, the Bank of England as expected left its interest-rate policy untouched in a Thursday announcement.

Stocks, meanwhile, looked to extend gains as the Dow industrials were fighting for its longest winning streak since February, which could dull demand for haven assets including gold.

In other metals trading, July silver SIN8, +0.79%  rose 0.6% to $16.645 an ounce, while July copper HGN8, +1.28% changed hands at $3.0985 a pound, up 1.4%. July platinum PLN8, +0.65% rose 0.4% to $920.20 an ounce and June palladium PAM8, +0.72%  added nearly 0.5% to $975.30 an ounce.

In ETF action, the SPDR Gold Shares GLD, -0.21%  rose 0.4%, while the iShares Silver Trust SLV, +0.13% added 0.5%. The VanEck Vectors Gold Miners GDX, +0.49%  slipped 0.1%.

The World Gold Council reported Wednesday that global gold-backed ETF holdings added 72.2 metric tons to 2,481 metric tons in April. That was the strongest month of net inflows in more than a year, it said, with the growth led by “significant North American and European inflows and supported by a small increase in Asia.”


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