Gold prices reached a one-month high after the dollar was dented by weaker CPI data.

 

As slightly milder consumer inflation data fueled predictions on lower interest rates this year, gold prices surged to a one-month high in Asian trade on Thursday, following a decline in the dollar and Treasury yields.


Amid some speculation that the Federal Reserve will be able to lower interest rates further this year due to slower inflation and a cooling labor market, the yellow metal was now on the verge of breaking above $2,700 an ounce for the first time since early December.

However, once Israel and Hamas agreed a ceasefire mediated by the United States, further gold increases were constrained by a decline in demand for safe havens. Dollar losses were also restrained by uncertainty surrounding President-elect Donald Trump's nomination on Monday and the expectation of additional U.S. economic indicators.

By 00:01 ET (05:01 GMT), gold futures expiring in February increased 0.4% to $2,728.0 an ounce, while spot gold increased little to $2,697.45 an ounce.

CPI relief and a declining dollar help gold.

Gold gains mostly followed somewhat lower-than-expected December consumer price index inflation data. While the core CPI barely fell short of predictions, the headline CPI was within estimates.

However, the report, which was released the day after producer price index data that was softer than anticipated, boosted wagers that the Fed would be more inclined to lower rates this year if U.S. inflation decreased. Half of the central bank's rate cuts in 2024 are expected to occur in 2025, with two rate cuts anticipated in 2025.

By lowering the opportunity cost of investing in non-yielding assets, lower rates help gold.

According to the CPI statistics, the dollar fell from a two-year high, although it still held onto the most of its recent gain.


As demand for safe havens declines and economic data looms, gold gains are constrained.
However, waning demand for safe havens, particularly following the Israel-Hamas ceasefire, restrained gold advances. The demand for gold in 2024 was significantly influenced by the Middle East conflict.

A surge in more general risk-driven assets also put pressure on the yellow metal as risk appetite increased due to the possibility of U.S. rate cuts.

Before additional important economic data was due in the next several days, traders were still on edge. Data on retail sales and unemployment claims in the United States is due later today.

After recording modest increases on this week's inflation readings, other precious metals were divided. Silver futures increased 0.3% to $31.622 an ounce, while platinum futures dropped 0.1% to $948.15 an ounce.

Following many significant increases in recent sessions, the price of copper, one of the industrial metals, stabilized. March copper futures were steady at $4.3957 a pound, while benchmark copper futures on the London Metal Exchange increased 0.3% to $9,192.50 a ton.

For additional clues about the largest copper importer in the world, all eyes will be on China's fourth-quarter GDP statistics, which is due on Friday.