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Gold reverses losses after US inflation data, ECB decision

Spot gold edged higher to $1 891.75 an ounce at 2:07 p.m. in London.
Image: Christopher Pike/Bloomberg

Gold reversed an earlier decline after US inflation data showed domestic prices rising slightly faster than expected, causing real Treasury yields to decline.

Thursday’s US Consumer Price Index showed prices rising 0.6% in May from the prior month, slightly more than economists forecast. That follows a 0.8% jump in April that was the largest since 2009.

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Real yields eased after the data due to the strong gain in inflation expectations, allowing gold to recover. Though higher than expected, the relatively small beat of estimates may not be enough to force the Federal Reserve to change its dovish stance — an ideal situation for bullion.

So far Fed officials have been almost unanimous in saying inflation will be transitory, giving them no cause to taper stimulus with the economy still in recovery. Persistently high price gains may force them to consider monetary tightening, which would harm non-interest bearing gold.

The European Central Bank renewed its pledge to maintain faster emergency bond-buying to sustain the euro-area’s rebound, underscoring their determination to allow no let-up in stimulus.

Spot gold edged higher to $1 891.75 an ounce at 2:07 p.m. in London, after dropping 0.2% on Wednesday. Prices earlier fell as much as 1% to $1870.10. Silver gained, while platinum and palladium fell. The Bloomberg Dollar Spot Index declined 0.1%.

On the coronavirus front, the Group of Seven leaders is set to vow to deliver at least 1 billion extra vaccine doses over the next year to help cover 80% of the world’s adult population, according to a draft communique seen by Bloomberg News.

© 2021 Bloomberg

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ECONOMIC DATA  

  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products May 2021 5.20%
  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 5.90%
  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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