Gold holds gain as investors weigh US inflation, ECB decision

Spot gold was little changed at $1 898.70 an ounce at 12:00 p.m. in Singapore, after climbing 0.5% on Thursday.
Image: Andrey Rudakov/Bloomberg

Gold held an advance as some investors deemed that the slightly faster-than-expected rise in US inflation is likely to be transitory, keeping ongoing central-bank support intact.

The consumer price index climbed 0.6% in May, the second-largest advance in more than a decade. Though distorted by the pandemic, the CPI jumped 5% from a year ago, the biggest annual gain since August 2008, according to Labour Department data Thursday. Real yields eased after the data, boosting the appeal of non-interest-bearing bullion.

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Also on Thursday, European Central Bank President Christine Lagarde renewed a pledge to deliver faster bond buying even as officials acknowledged for the first time since 2018 that the euro-zone economy is no longer overshadowed by risks to its growth outlook. Investors will now turn their attention to the Federal Reserve’s meeting on June 15-16 for guidance on its monetary policy path.

Bullion is holding near $1 900 an ounce as the reaction to the latest CPI data suggest that traders are aligning with the Fed’s view that inflationary pressures are temporary and that any changes in ultra-accommodative policy will likely happen very gradually. Another key event on the calendar is the Fed’s Jackson Hole symposium — the yearly retreat of the world’s top central bankers and economists — from August 26-28.

“Despite the larger-than-expected US CPI number, yields came under pressure following the report, which has provided support to gold,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. “We believe the Fed will likely continue to hold the view of transitory inflation at next week’s Federal Open Market Committee meeting, but language could change at Jackson Hole in late August, opening the door for a tapering announcement later in the year.”

Spot gold was little changed at $1 898.70 an ounce at 12:00 p.m. in Singapore, after climbing 0.5% on Thursday, and is heading for a small weekly gain. Prices advanced to $1 916.64 last week, the highest intraday level since January 8. Silver rose, while platinum steadied and palladium dropped. The Bloomberg Dollar Spot Index ticked lower after falling 0.1% on Thursday.

© 2021 Bloomberg

COMMENTS   1

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Gold will hold out for 1-5 years due to the US inflation.
No one can stop it, the US is the biggest economy.

Thus our Gold miners will continue to be loaded with cash.

End of comments.

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ECONOMIC DATA  

  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products May 2021 4.40%
  CPI ex OERThe Consumer Price Index excluding Owners’ Equivalent Rent (CPI ex OER) measures monthly changes in prices for a range of consumer products excluding Owners’ equivalent rent that measures changes in the cost of owner-occupied housing May 2021 5.00%
  RepoThe rate at which the Reserve Bank lends money to the country’s commercial banks and set by the Reserve Bank’s Monetary Policy Committee. Jun 2021 3.50%
  Prime lendingThe Prime Lending Rate is the rate of interest that commercial banks will charge their clients when issuing a loan (home loan or vehicle finance) Jun 2021 7.00%
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