Gold futures rose on Tuesday, after data showed US consumer prices rose in March for the fourth month in a row and inflation hit a two-year high. Bullion is often seen as a hedge against inflation.
The consumer price index rose 0.6% in March, the government said on Tuesday, driven by rising oil costs. Economists surveyed by the Dow Jones and The Wall Street Journal had forecast a 0.5% rise in the CPI. The 12-month inflation rate rose to 2.6% in March from 1.7%.
The reading “exceeded expectations slightly, indicating that the US economy is warming slightly more than expected,” Jason Teed, co-portfolio of Gold Bullion Strategy Fund QGLDX,
said MarketWatch.
He emphasized that much of the inflationary pressure came from rising petrol prices and that core inflation was lower. “These changes are largely expected to be temporary by economists, leading to an unadapted position,” said the Federal Reserve, which is also research director at Flexible Plan Investments Ltd.
Overall, “gold is responding positively to the news, but the short-term price movements of the metal are not an indication of long-term trends,” he said.
Gold June GC00,
GCM21,
rose $ 8.50, or 0.5 percent, to $ 1,741.20 an ounce, a day after the precious metal recorded its lowest finish for its most active contract since April 5, FactSet data show.
“Inflation is likely to rise and the numbers for the next few months may seem abnormally high, as the base effects of the 2020 blockages distort the data,” wrote Fawad Razaqzada, a market analyst at ThinkMarkets, referring to the distortions in the monthly inflation figure. resulting from abnormally high or low levels from a year ago.
“The Fed expects inflation to settle after a temporary acceleration. However, the key risk is if their assumption turns out to be wrong and price pressures remain high. In fact, with rising consumer inflation expectations, this could translate into actually rising price levels, ”he said.
The gold move in the session so far also comes as bond yields, which compete with gold for asylum, have fallen after inflation.
10-year treasury note TMUBMUSD10Y,
decreased by 1.5 basis points to about 1.66% after the CPI. A decline in bond yields tends to make gold more convincing for investors, as precious metals do not offer a coupon.
Meanwhile, more SIK21 silver,
SI00,
Shed added 50 cents, or 2 percent, to $ 25.37 an ounce, down 1.8 percent from a day ago.
More copper HGK21,
added 0.3% to $ 4.03 per kilogram. July platinum PLN21,
fell 0.8% to $ 1,164.70 an ounce, while June palladium PAM21,
quoted 0.6% at $ 2,688.50 per ounce.