Soft US inflation pushes gold prices higher

LONDON

Gold was set for its first weekly gain in four weeks on Friday after soft US inflation data suggested that the Federal Reserve might show caution on the pace of interest rate rises.

The weaker-than-expected April consumer price data on Thursday helped to knock the dollar from 2018 highs and push US bond yields down. Both fell further on Friday.

That benefits gold because a weaker dollar makes bullion cheaper for users of other currencies, while lower bond yields make non-yielding gold more attractive to investors.

“It (gold’s rise) was mostly a response to the consumer price data out of the US yesterday,” Capital Economics analyst Simona Gambarini said.

Spot gold was up 0.3 per cent at $1,324.71 an ounce by 1156 GMT after touching its highest since April 26 at $1,325.61, nudging its 100-day moving average of $1,326. It was up 0.8 per cent for the week.

US gold futures for June delivery had gained 0.2 per cent to $1,325.40.

Gold has traded in a range of about $1,310 to $1,355 since hitting a 1-1/2-year high in January.

Prices appeared to be building positive momentum, ScotiaMocatta technical analysts said.

Consolidation above resistance at the 100-day moving average might be a catalyst for more gains, MKS PAMP trader Tim Brown said.

But with the Fed likely to raise interest rates three more times this year, gold was likely to end 2018 at $1,300, Capital Economics’ Gambarini said. Higher interest rates hurt gold because they push up bond yields and tend to boost the dollar.

Federal Reserve Bank of St. Louis head James Bullard will make a speech on Friday, as will European Central Bank President Mario Draghi.

Gold investors largely brushed off tensions in the Middle East after the United States ditched an accord designed to stop Iran from developing nuclear weapons. Two days after this, Israel attacked Iranian military infrastructure in Syria.

“Geopolitical concerns are still a concern but investors aren’t paying significant attention,” Think Markets chief markets analyst Naeem Aslam said.

“The dollar story is more prominent,” he said.

A summit between the United States and North Korea to be held in Singapore on June 12 also eased fears of conflict.

Gold is traditionally seen as a safe asset in times of uncertainty.

In other precious metals, silver was up 0.8 per cent at $16.80 an ounce, rising above its technically important 100-day moving average and nearing its 200-day moving average.

It was at 2-1/2-week highs and set for a weekly gain of 2 per cent.

Platinum was flat at $924, having hit its highest since April 25 at $928.

Palladium advanced by 0.6 per cent to $1,004.70, holding above its technically important 200-day moving average after reaching its highest since April 23.